Series 79: Internal Rate Of Return

Internal Rate of Return

Internal rate of return (IRR) is a metric used to measure the performance of existing or proposed investments. An IRR analysis is often used to help decide whether to pursue a prospective acquisition.

IRR is simply the discount rate at which the NPV of all cash inflows and outflows of an investment is zero. If the IRR on a proposed investment exceeds a desired performance threshold, sometimes referred to as the hurdle rate, then the investment is considered attractive (all else being equal).

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