The correct answer is: C. Internal Rate of Return (IRR)
The IRR is the discount rate that makes the net present value (NPV) of a project equal to zero. It is a measure of the profitability of a project, and it assumes that cash inflows are reinvested at the project’s IRR.
The NPV is the present value of all future cash flows from a project, discounted at a given rate of return. It is a measure of the profitability of a project, and it assumes that cash inflows are reinvested at the discount rate.
The Accounting Rate of Return (ARR) is a measure of profitability that is calculated by dividing the average annual net income from a project by the average investment. It does not take into account the time value of money, and it assumes that cash inflows are reinvested at the company’s cost of capital.
The Discounted Payback Period is the number of years it takes for a project to recover its initial investment, when cash flows are discounted at a given rate of return. It is a measure of liquidity, and it does not take into account the time value of money.