Internal Rate of Return (IRR)

Internal Rate of Return (IRR) is a metric used to measure the profitability of an investment. It is the rate of return that makes the present value of an investment's future cash flows equal to the initial investment.

For example, if one invested $100 in a project, and the project's cash flows over the next 5 years are $30, $50, $20, $60, and $40 respectively, the IRR for the investment is the rate at which these cash flows are discounted to equal the initial investment.