Definition: The discount rate that makes the net present value of a specified series of investment cash flows equal to zero.
Example
An analyst solves for the rate that equates the initial investment with the present value of future net cash receipts and sale proceeds.
Keep the distinction clear
IRR is not a guaranteed return or a simple annual cash-on-cash measure. Unusual cash-flow patterns can produce more than one IRR or no useful IRR.
Related terms
Present Value · Cash Flow · Yield
Keep studying
References: FREC Course II syllabus, Session 15
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