Which capital budgeting technique evaluates projects based on the discount rate that sets the Net Present Value (NPV) equal to zero?

Explanation

Core Concept: The Internal Rate of Return (IRR) is the exact discount rate at which total discounted cash inflows equal initial cash outflows, rendering NPV = 0. Context/Distractors: Payback period ignores time value of money, ARR uses accounting profit rather than cash flow, and Profitability Index measures the ratio of PV inflows to initial outlay. Exam Tip/Key Fact: When IRR exceeds the cost of capital (WACC), the project should generally be accepted.