Which capital budgeting decision metric calculates the precise discount rate that sets the Net Present Value (NPV) of a project equal to zero?

Explanation

• The Internal Rate of Return (IRR) is the exact discount rate at which total discounted cash inflows equal initial capital cash outflows (NPV = 0).
• A project is considered financially viable if its IRR exceeds the company’s required rate of return or Weighted Average Cost of Capital (WACC).
• When evaluating mutually exclusive projects, NPV is generally preferred over IRR if conflicting rankings occur.