Internal Rate of Return
Definition
What is Internal Rate of Return?
The discount rateThe rate used to convert future cash flows into present value. that makes a project's net present valuePresent value of expected cash inflows minus present value of expected cash outflows. equal to zero.
Example in practice
How This Looks in Practice
A project with 18% IRR exceeds a company's 14% hurdle rateThe minimum acceptable return for an investment or project..
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Related Terms
Net Present Value
Present value of expected cash inflows minus present value of expected cash outflows.
Capital BudgetingModified Internal Rate of Return
A return measure that uses specified financing and reinvestment rates rather than assuming reinvestment at the IRR.
Capital BudgetingPayback Period
The time required for cumulative cash inflows to recover the initial investment.
Company DisclosuresAnnual Report
A yearly publication containing financial statements, management discussion, governance information, and other disclosures.