Internal Rate of Return

Question

09 Sep 2023

Answer :

Word Count : 431

Internal Rate of Return (IRR) - Short Notes:

1. Definition: The Internal Rate of Return (IRR) is a financial metric used to evaluate the potential profitability of an investment or project. It represents the discount rate at which the net present value (NPV) of future cash flows from the investment equals zero.

2. Investment Decision: When calculating IRR, if the resulting rate is greater than the required rate of return or cost of capital, it suggests that the investment or project is expected to be profitable. Conversely, if the IRR is less than the required rate, it may not be a financially sound investment.

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