Question

Complete the following decision rule: A project should be accepted if its ______ exceeds the firm's required rate of return.

A)IRR
B)NPV
C)payback
D)discounted paybackE)AAR

Answer 1

A project should be accepted if its IRR exceeds the firm's required rate of return.

Step-by-step explanation:

The correct completion for the decision rule is (A) IRR (Internal Rate of Return).

The Internal Rate of Return (IRR) is the discount rate at which the net present value of a project is zero. In other words, if the IRR of a project is higher than the firm's required rate of return, it means that the project's estimated return is greater than the cost of capital, so it should be accepted.

For example, if a project has an IRR of 10% and the firm's required rate of return is 8%, the project should be accepted because the IRR exceeds the firm's required rate of return.