Internal Rate of Return (IRR)

DannyT90

I have my exam this coming Monday and I am confident with every topic except Internal Rate of Return.

Could someone please break it down into simple terms what it is and why it is used.

Many Thanks.

paulawelsh

Hi
the irr is as follows: you need 2 percentages:

lowest % +(lowest % /lowest + highest %) + highest % = irr

kind regards

Paula Welsh

PeterC

The IRR is the discount rate which gives a zero NPV. If alternatives to your project have a return greater than the IRR, then the project is not worth doing. If the alternatives have a lower return than the IRR, then do the project.

See also "Internal rate of return" at https://docs.google.com/document/d/1icNhvz1m0pMF3CF_oVZfQAo36QBn2qmxmiWndjFECYg/edit?usp=sharing