Definition of ''Internal Rate of Return - IRR''
The discount rate frequently used in capital budgeting that makes the net present value of all cash flows from a specific project equal to zero.
Commonly, the higher a project''s internal rate of return, the more wanted it is to undertake the project. Like, IRR can be utilized to rank several prospective projects a firm is considering. Assuming all other factors are equivalent among the several projects, the project with the highest IRR would possibly be considered the best and undertaken first.
IRR is sometimes considered to as "economic rate of return (ERR)."