The IRR rule states that firms should accept any investment (normal)project offering an internal rate of return in excess of the cost of capital.

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The IRR rule is commonly used as a decision-making tool in capital budgeting. It suggests that a project should be accepted if its internal rate of return (IRR) is greater than the required rate of return, which is often the company's cost of capital. This is based on the assumption that the higher the IRR, the higher the profitability of the project. Therefore, if the IRR is greater than the cost of capital, the project is expected to generate positive net present value (NPV) and should be accepted.

The IRR Rule States That Firms Should Accept Any Investment