What's the difference between the simple rate of return and the internal rate of return?
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The simple rate of return also known as accounting rate of return is based on net income after tax over the equity and ignores time value of money while internal rate of return uses annual cash flow over equity and considers the time value of money.
Theinternal rate of return can best be described as which one of thefollowing ? The rate which the business has topay to raise finance for an investment . Thereturn required by themanagers of thebusiness . The discount rate at which a set of cash flows has a positive net present
C ) The discount rate at which a set of cash flows has a zero net present value .
Internal rate of return is the discount rate at which the net present value of the project tends to be zero.