What is the decision criteria for IRR?
If IRR > r, then the project’s rate of return is greater than its cost– some return is left over to boost shareholders’ returns.
Example: r = 10%, IRR = 15% –> Accept project since return is more than cost
Therefore, IRR Acceptance Criteria:
- If IRR > r, accept project.
- If IRR < r, reject project.
Depending on your school, you might be required to use trial and error, interpolation method or financial calculator.