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Internal Rate of Return = IRR

Created by Arthur Aslanyan (Nafta College), last modified on Apr 03, 2020

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A value of discount rate which nullifies the project's NPV :

$\begin{array}{l}\displaystyle \mbox{NPV} = \sum_{i=0}^n \frac{R_{t_i}}{(1+\mbox{IRR})^{t_i}} = 0\end{array}$

The usual practise is to give preferences to the investment projects with higher IRR and make a direct comparison of IRR against the Weighted Average Cost of Capital (WACC).

See also

Economics / Investment / Financial Investment / Cash Discount

[ Weighted Average Cost of Capital (WACC) ]

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