IRR (Internal Rate of Return)

The Internal Rate of Return (IRR) is a financial metric used to evaluate the profitability of an investment. It represents the annual percentage return you can expect from the initial investment, considering all future cash inflows and outflows. Essentially, IRR is the discount rate at which the present value of the investment's future profits equals its initial cost, making the net value zero. A higher IRR indicates a more attractive investment, while a lower IRR suggests less profitability. It helps compare different investments and make informed decisions about where to allocate resources.