Let’s suppose an organization is considering 2 proposals. The first proposal has an internal rate of return (IRR) of 9%, while the second proposal has an internal rate of return of 8%. The CEO...

Internal rate of return (IRR) is a measure used in capital budgeting to calculate the rate of return of an investment over its entire life. It is the discounted rate of return at which the net present value of all future cash inflows is equal to the initial outlay. It is expressed as a percentage and is often used by companies to evaluate the profitability of capital investments. The IRR calculation is based on the discounted cash flow (DCF) of a proposed project, which is a comparison of the cost of the cash required upfront and its discounted future value at the end of the project’s life.
Yes, I agree with the CEO that the first proposal should be implemented. For a business decision, Internal Rate of Return (IRR) is a metric used for gauging its differences in profitability between projects and it...