DEFINITION of 'Internal Rate Of Return  IRR'
The discount rate often used in capital budgeting that makes the net present value of all cash flows from a particular project equal to zero. Generally speaking, the higher a project's internal rate of return, the more desirable it is to undertake the project. As such, IRR can be used to rank several prospective projects a firm is considering. Assuming all other factors are equal among the various projects, the project with the highest IRR would probably be considered the best and undertaken first.
IRR is sometimes referred to as "economic rate of return (ERR)."
INVESTOPEDIA EXPLAINS 'Internal Rate Of Return  IRR'
You can think of IRR as the rate of growth a project is expected to generate. While the actual rate of return that a given project ends up generating will often differ from its estimated IRR rate, a project with a substantially higher IRR value than other available options would still provide a much better chance of strong growth.
IRRs can also be compared against prevailing rates of return in the securities market. If a firm can't find any projects with IRRs greater than the returns that can be generated in the financial markets, it may simply choose to invest its retained earnings into the market.
To learn more on how IRR is used in the valuation of companies, read Internal Rate Of Return: An Inside Look and What are the main differences between compound annual growth rate (CAGR) and internal rate of return (IRR)?
VIDEO

Return On Equity  ROE
The amount of net income returned as a percentage of shareholders ... 
Return On Investment  ROI
A performance measure used to evaluate the efficiency of an investment ... 
Net Present Value  NPV
The difference between the present value of cash inflows and ... 
Return On Capital Employed (ROCE)
A financial ratio that measures a company's profitability and ... 
Overnight Return
One of the two components of the total daily return generated ... 
Intraday Return
One of the two components of the total daily return generated ...

Investing
Return on Sales
Return on Sales is a financial ratio that is used to measure a company's performance. Specifically, it is Operating Profit divided by Net Sales. The result is a percent, such as 10%, that indicates ... 
Investing
The interest rate used to define the “riskfree” rate of return is the:
a. discount rate.b. 90day Treasury bill rate.c. fiveyear Treasury note rate.d. federal funds rate. Answers: bThe 90day Treasury bill rate is used because there is no credit risk, and the maturity ... 
Active Trading
FYI On ROI: A Guide To Calculating Return On Investment
Return on investment is a simple equation that can give you an edge when finetuning your portfolio  here's how to use it. 
Bonds & Fixed Income
Achieving Better Returns In Your Portfolio
We look at three risk factors that best explain the bulk of equity performance. 
Fundamental Analysis
How To Calculate Your Investment Return
How much are your investments actually returning? Find out why the method of calculation matters. 
Economics
How Return On Equity Can Help You Find Profitable Stocks
It pays to invest in companies that generate profits more efficiently than their rivals. This is where ROE comes in. 
Investing
Operating Profit
Operating profit is the profit generated from the core business of a company before accounting for interest and taxes. 
Investing Basics
What are the main differences between compound annual growth rate (CAGR) and internal rate of return ...
The compound annual growth rate (CAGR), measures the return on an investment over a certain period of time. The internal rate of return, or IRR, also measures investment performance but is more ... 
Investing Basics
What's the difference between weighted average cost of capital (WACC) and internal rate of return (IRR)?
Both weighted average cost of capital (WACC) and internal rate of return (IRR) are great measures for assessing value, but there are fundamental difference you need to know. 
Fundamental Analysis
The Most Accurate Way To Gauge Returns: The Compound Annual Growth Rate
The compound annual growth rate, or CAGR for short, represents one of the most accurate ways to calculate and determine returns for individual assets, investment portfolios and anything that ...