What term describes the interest rate that equates a project's future cash flows to its initial cost?

The term that describes the interest rate that equates a project's future cash flows to its initial cost is known as the Internal Rate of Return (IRR).

IRR is a key financial metric used in project evaluation and capital budgeting. It represents the discount rate at which the net present value (NPV) of all cash flows from a particular project equals zero. In simpler terms, it is the rate of return at which an investment breaks even when considering the time value of money. This makes IRR a vital tool for businesses when deciding whether to pursue a project, as it allows investors to compare the profitability of different investments.

By calculating the IRR, businesses can determine the largest interest rate at which the project's revenues (cash inflows) are sufficient to cover its costs (cash outflows). If the IRR exceeds the required rate of return or cost of capital, the project is considered a worthwhile investment.

The other options refer to different concepts in financial analysis. The return on investment (ROI) is a measure of the profitability of an investment but does not specifically relate to the concept of equating cash flows to costs. The net present value (NPV) is the difference between the present value of cash inflows and outflows but