The Internal Rate Of Return is the rate of interest which results in a zero net cash flow of a set of discounted cash in-flows compared with the original capital outflow (investment).
Another view is that the Internal Rate of Return is the discount rate which equates the present value of a stream of incomes to an initial investment. In special cases it can be the break-even rate of interest.
If the Internal Rate of Return is less than the minimum required return from a project, with a given risk profile, then the project would not be undertaken.
The Internal Rate of Return Calculator below makes the following assumptions:-
There is a one-time capital outflow at the beginning of the project (Time 0).
All future periodic inflows are the same (constant).
All incomes are received at the end of each period.
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