A value of required discount rate to nullify the expected NPV of the Investment Project:
| \mbox{NPV} = \sum_{i=0}^n \frac{R_i}{(1+\mbox{IRR})^i} = 0 |
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).
The corporate investment policy usually dictates that:
- Investment Projects with IRR < WACC should be rejected
- Investment Projects with higher IRR should have a financing priority over the Investment Projects with lower IRR
See also
Economics / Investment / Financial Investment / Financial Investment Metrics
[ Financial Investment Project ]
[ Weighted Average Cost of Capital (WACC) ] [ Cash Discount ] [ Net Present Value (NPV) ]
[ Modified Internal Rate of Return (MIRR) ]