Internal Rate of Return

It can be defined as the discount rate often used in capital budgeting that makes the net present value of all cash flows from a particular project equal to zero. Generally speaking, the higher a project's internal rate of return, the more desirable it is to undertake the project. As such, IRR can be used to rank several prospective projects a firm is considering. Assuming all other factors are equal among the various projects, the project with the highest IRR would probably be considered the best and undertaken first. Alternative names include .DCF (discounted cash flow yield),Marginal efficiency of Capital,discounted yield,economic rate of return and Actuarial of return. It can be found by drawing a graph known as a present value profile or by Calculation involving linear interpolation.