Questions: Identify the correct definition of internal rate of return: The internal rate of return is the: Multiple Choice discount rate that causes a project's aftertax income to equal zero. discount rate that results in a zero net present value for the project. discount rate that results in a net present value equal to the project's initial cost. rate of return required by the project's investors. project's current market rate of return.

The answer is the second one: the discount rate that results in a zero net present value for the project.

Explanation for each option:

1. Discount rate that causes a project's aftertax income to equal zero: This is incorrect. The internal rate of return (IRR) is not related to aftertax income being zero; it is related to the net present value (NPV) of cash flows.

2. Discount rate that results in a zero net present value for the project: This is correct. The IRR is defined as the discount rate at which the NPV of all cash flows (both inflows and outflows) from a project equals zero.

3. Discount rate that results in a net present value equal to the project's initial cost: This is incorrect. The NPV being equal to the project's initial cost is not the definition of IRR. The IRR is specifically when the NPV is zero.

4. Rate of return required by the project's investors: This is incorrect. The rate of return required by investors is typically referred to as the required rate of return or the hurdle rate, not the IRR.

5. Project's current market rate of return: This is incorrect. The IRR is a specific calculation based on the project's cash flows, not the market rate of return.

In summary, the internal rate of return is the discount rate that results in a zero net present value for the project.