‘Internal Rate of Return Technique’ is used for:

Correct option is D

The Internal Rate of Return (IRR) technique is one of the most important Capital Budgeting evaluation tools used to assess the profitability of long-term investment projects.
IRR is the discount rate at which the Net Present Value (NPV) of a project becomes zero. It helps management decide whether to accept or reject investment proposals by comparing IRR with the required rate of return or cost of capital.
· If IRR > Cost of Capital, project is accepted.
· If IRR < Cost of Capital, project is rejected.
Thus, IRR is exclusively used in capital budgeting decisions, not in working capital, dividend, or other decisions.
Hence, the correct answer is (d) Capital Budgeting Decision.
Information Booster
1. IRR is a time value of money–based technique.
2. It is widely used for ranking mutually exclusive projects.
3. IRR assumes cash flows are reinvested at the IRR, which is a limitation.
4. IRR works well when cash flows are conventional (one sign change).
5. It helps evaluate projects like plant expansion, equipment purchase, or new product launch.
Additional Information
· (a) Working Capital Decision: Deals with short-term assets and liabilities, not long-term investment appraisal.
· (b) Venture Capital Decision: Venture capitalists may use IRR, but the technique itself belongs to capital budgeting, not specifically VC decisions.
· (c) Dividend Decision: Deals with profit distribution vs. retention; IRR has no role here.