The role of Internal Rate of Return (IRR) in capital budgeting is to help businesses decide whether they should undertake a project or investment. It does this by calculating the rate of return at which the net present value of the project's cash inflows and outflows equals zero. If the IRR is higher than the company's required rate of return, the project is considered a good investment. In the context of multiple projects, the one with the highest IRR would typically be chosen.
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