An Analyst’s Guide to Internal Rate of Return (IRR)

What is the Internal Rate of Return (IRR)?

The Internal Rate of Return (IRR) is the discount rate that makes theย net present value (NPV)ย of a project zero. In other words, it is the expected compound annual rate of return that will be earned on a project or investment. In the example below, an initial investment of $50 has a 22% IRR. That is equal to earning a 22% compound annual growth rate.

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