💡  A. Compare to the annual cost of capital – ᤶ ᤷ Incorrect The cost of capital represents the company's overall financing cost, including debt and equity. While it is related to investment decisions, projects are typically evaluated using the required rate of return (RRR), which is often derived from the cost of capital but includes risk adjustments.  B. Compare to the annual interest rate – ᤶ ᤷ Incorrect The interest rate applies to debt financing but does not fully capture the expected return required by investors for taking on project risk. Comparing IRR to an interest rate alone does not provide a complete picture of whether the project meets the company's investment expectations.  C. Compare to the required rate of return (RRR) – ࿨ ࿩ ࿪ Correct Answer The internal rate of return (IRR) is a project's expected return, expressed as a percentage. To determine if the project is acceptable, IRR should be compared to the required rate of return (RRR), which represents the minimum return needed to justify the investment. Acceptance criteria: o IRR ≥ RRR → Accept the project. o IRR < RRR → Reject the project.  D. Compare to the net present value (NPV) – ᤶ ᤷ Incorrect NPV and IRR are related but different metrics. NPV measures the absolute dollar value of expected benefits, while IRR measures the percentage return. If using NPV, the decision rule is: o NPV > 0 → Accept the project. o NPV < 0 → Reject the project. However, when working with IRR, the correct comparison is with the RRR, not NPV.