The internal rate of return (IRR) is a metric used by firms to decide whether they should make Investment It is an indicator of the efficiency of an investment, as opposed to net present value (NPV), which indicates value or magnitude.
In Simple words, The Internal Rate of Return ( IRR) is the discount rate that results in a net present value of zero for a series of future cash flows. It is a Discounted Cash Flow (DCF) approach to valuation and investing just as Net Present Value (NPV). Both IRR and NPV are widely used to decide which investments to undertake and which investments not to make.
The IRR is the true interest yield expected from an investment expressed as a percentage.
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