The document discusses internal rate of return (IRR) and cost of capital. IRR is the discount rate that makes the net present value of all cash flows from a project equal to zero. The higher a project's IRR, the more desirable it is. However, IRR can sometimes conflict with net present value calculations for mutually exclusive projects. Cost of capital refers to the minimum rate of return a firm must earn on its investments. It is calculated as the return at zero risk plus premiums for business risk and financial risk. There are conceptual controversies regarding the relationship between cost of capital and capital structure as well as the use of historic versus future costs in decision making.