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

Question

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The IRR rule states that if the internal rate of return (IRR) of a project exceeds the cost of capital, the project should be accepted. This is because the IRR represents the discount rate that makes the present value of expected cash inflows equal to the initial investment. If the IRR is greater than the cost of capital, it means that the project generates a return that exceeds the required rate of return, making it a good investment for the firm.

The IRR Rule States That Firms Should Accept Any Project