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A project's internal rate of return (IRR) is the Select that forces the PV of its inflows to equal its cost. The IRR is an estimate of the project's rate of return, and it is comparable to the select on a bond. The equation for calculating the IRR IS: NPV - CF + C CP, (1+ ) (1 + IRR) (+ ) O CP, AT (1 + TRR) Ch is the expected cash flow in Period and cash outflows are treated as negative cash flows. There must be a change in cash flow signs to calculate the IRR. The IRR equation is simply the NPV equation solved for the particular discount rate that causes NPV to equal Select The IRR calculation assumes that cash flows are reinvested at the Select the IRR is Select than the project's risk-adjusted cost of capital, then the project should be accepted however, if the IRR is less than the project's risk-adjusted cost of capital, then the project should be select Because of the IRR reinvestment rate assumption, when projects are evaluated the IRR approach can lead to conflicting results from the NPV method. Two basic conditions can lead to conflicts between NPV and IRR: Select differences (earlier cash flows in one project vs. later cash flows in the other project) and project size the cost of one project is larger than the other). When mutually exclusive projects are considered, then the select method should be used to evaluate projects

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