Definition of Internal Rate Of Return

The internal rate of return (IRR) is the financial analysis to calculate the projected profit made on potential investments or projects started by the company. The term Internal states the fact that the calculations of NPV exclude external factors like risk-free rate, financial risk, the cost of capital, or inflation. In simple words, it is the rate of return which a company is looking forward to being earned on the projects or investments done by the company.


Formula of Internal Rate of Return (IRR):


IRR Formula

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