2006-12-04 17:52:06 · 2 answers · asked by Anonymous in Business & Finance ➔ Investing
Internal rate of return or IRR is the rate at which the present value of all cash inflows equals the cash outflows.
2006-12-06 04:19:24 · answer #1 · answered by Mathew C 5 · 0⤊ 0⤋
Simply stated its the future value of an investment with a number of cash flows. Say you had a savings account that drew interest and you added money to it perodically. The internal rate of return is the return on that account at a certain time in the future. Its also used in capital budgeting to figure out the return on a project that a company may invest in. Like if they invested a certain amount of money and the project generated cash flows periodically in the future. The internal rate of return is the return on that investment at some point in the future. Internal rate of return is also defined as the interest rate that makes the net present value of future cash flows equal to zero.
2006-12-04 19:50:57 · answer #2 · answered by jeff410 7 · 0⤊ 0⤋