Internal Rate of Return (IRR)
The internal rate of return (IRR) is a financial metric used to evaluate the profitability of investments. It represents the discount rate at which the net present value (NPV) of all cash flows equals zero. IRR is widely used in capital budgeting to compare the desirability of investments or projects, helping investors identify the most profitable opportunities.
Key Takeaways
- IRR evaluates investment profitability.
- Expressed as an annualized rate.
- Helps compare investment opportunities.
- Used in capital budgeting and financial analysis.
