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Internal Rate of Return (IRR) :
This rate attempts to find the earnings rate, which equates the current value of the streams of earnings to the investment outlay. IRR is described as the rate of return, which discounts all the future cash inflows to exactly equal the outlay.
Accept-Reject Rule:
The project with IRR higher than the cutoff rate will be accepted. if not, it will be rejected. The management will be indifferent if the IRR = cut-off rate.
Advantages:
Disadvantages:
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