Share:
Glossary Finance

Internal rate of return (IRR)

The internal rate of return (IRR) is the yearly discount rate at which the present value of an investment's cash flows adds up to zero, a single percentage summarising its profitability.

Last reviewed:

AdSense Placeholder
Slot: header_reference_page

In more detail

For an outlay of $1,000 followed by $450 a year for three years, the IRR is about 16.6%. A project is attractive if its IRR beats your required return. IRR has no formula to solve directly, so it is found by iteration, and it can mislead when cash flows change sign several times. See also Net present value (NPV).

Try these tools

IRR Calculator

Calculate the internal rate of return (IRR) for an initial investment followed by a series of periodic cash flows.

Payback Period Calculator

Calculate how many years it takes to recover an initial investment from a series of periodic cash inflows.

See also

  • Glossary Net present value (NPV)
    Net present value (NPV) is the sum of an investment's future cash flows, each discounted back to today's money, minus the initial cost.
  • Glossary Return on investment (ROI)
    Return on investment (ROI) is the gain or loss on an investment as a percentage of what was invested.
Back to Glossary
AdSense Placeholder
Slot: footer_leaderboard