DEFINITION of 'IRR Rule'
A measure for evaluating whether to proceed with a project or investment. The IRR rule states that if the internal rate of return (IRR) on a project or investment is greater than the minimum required rate of return – the cost of capital – then the decision would generally be to go ahead with it. Conversely, if the IRR on a project or investment is lower than the cost of capital, then the best course of action may be to reject it.
INVESTOPEDIA EXPLAINS 'IRR Rule'
The higher the IRR on a project and the greater the amount by which it exceeds the cost of capital, the higher the net cash flows to the investor. In general terms, a company that has to choose one, among several similar projects with equivalent degrees of risk, may go with the one that provides the highest IRR.
The IRR rule is one among a number of rules used to evaluate projects in capital budgeting. However, it may not always be rigidly enforced. For example, a company may prefer a project with a lower IRR over one with a higher IRR because the former provides other intangible benefits such as being part of a bigger strategic plan or impeding competition. A company may also prefer a larger project with a lower IRR to a much smaller project with a higher IRR, because of the higher cash flows generated by the larger project.

Net Present Value  NPV
The difference between the present value of cash inflows and ... 
Hurdle Rate
The minimum rate of return on a project or investment required ... 
Internal Rate Of Return  IRR
The discount rate often used in capital budgeting that makes ... 
Discounted Cash Flow  DCF
A valuation method used to estimate the attractiveness of an ... 
Capital Budgeting
The process in which a business determines whether projects such ... 
Modified Internal Rate Of Return ...
While the internal rate of return (IRR) assumes the cash flows ...

What's the difference between net present value and internal rate of return? How ...
Both of these measurements are primarily used in capital budgeting, the process by which companies determine whether a new ... Read Full Answer >> 
Which is a better measure for capital budgeting, IRR or NPV?
In capital budgeting, there are a number of different approaches that can be used to evaluate any given project, and each ... Read Full Answer >>

Bonds & Fixed Income
Breaking Down The Fed Model
Learn what pundits mean when they say that stocks are undervalued according to the Fed model. 
Forex Education
Time Value Of Money: Determining Your Future Worth
Determining monthly contributions to college funds, retirement plans or savings is easy with this calculation. 
Fundamental Analysis
Internal Rate Of Return: An Inside Look
Use this method to choose which project or investment is right for you. 
Charts & Patterns
Why These Could Be 2015's 10 Best Biotech Stocks
A quick look at a 10 biotech companies that are poised to deliver for shareholders in 2015. 
Mutual Funds & ETFs
How To Build A Bond Ladder?
Bond laddering is a strategy used when building a portfolio: an investor can spread out interest rate risk and create a stream of cash flows for income. 
Fundamental Analysis
What is a Null Hypothesis?
In statistics, a null hypothesis is assumed true until proven otherwise. 
Charts & Patterns
Why These Could Be 2015's 10Best Media Stocks
A list of toptier and speculative media stocks for 2015. 
Investing
Why Is The Nasdaq 5,000 Different This Time?
The Nasdaq this week has slipped below the 5,000 highwater mark it reached last week. The last time it hit above 5,000 was in March 2000. 
Charts & Patterns
Why These Could Be 2015's 10Best Pharma Stocks
The pharmaceutical stocks covered here have significant potential going forward. Here's why. 
Charts & Patterns
Why These Are 2015's 10Best Financial Stocks
If you're going to invest in the financial stocks, these names need to be on your radar.