Chapter 26, Problem 13Q

To determine

Internal rate of return:

Internal return rate (IRR) can be defined as a tool that helps in the process of capital budgeting to estimate the profitability of all potential investments. The internal rate is the discount rate that makes the net present value of the cash flows from a project equivalent to zero.

To determine: The term “cost of capital” and indicate its relevance to the decision rule under the internal rate of return technique.