What is another principal capital budgeting model for evaluating IT projects alongside payback and ROI?

The internal rate of return (IRR) is widely used in capital budgeting for evaluating the profitability of potential investments, such as IT projects. It represents the discount rate at which the net present value (NPV) of all cash flows from the project becomes zero. This means that IRR reflects the project's anticipated return, equating the present value of incoming cash flows to the present value of outgoing cash flows.

Utilizing IRR enables decision-makers to assess whether a project's return meets or exceeds the cost of capital or a required rate of return. If the IRR is greater than the benchmark or required return, the project is considered a favorable investment, leading to informed decisions about allocating resources to those projects that are expected to yield the best returns.

In contrast, the other options do not serve the same purpose or are not standard models for capital budgeting evaluation in this context. For instance, future present value refers to the calculation of how much a future cash flow is worth today, which is not a dedicated model for project evaluation. The external rate of return is not a commonly recognized capital budgeting technique in this context. ROP (Return on Productivity) is more focused on evaluating efficiency and does not specifically pertain to capital budgeting directly. Thus, the internal