A metric used to estimate the profitability of potential investments. It is the discount rate that makes the net present value (NPV) of cash flows from an investment equal to zero.
Example: If an investment of $100,000 generates annual cash flows of $30,000 for 5 years, and the IRR is calculated to be 15%, this means the investment is expected to yield an annual return of 15%, making the NPV of the investment zero at that rate.
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