Internal Rate of Return (IRR)
The internal rate of return is the discount rate at which the net present value of a project's cash flows is zero.
What is Internal Rate of Return (IRR)?
A project whose IRR exceeds its cost of capital should create value. Firms often set a required rate of return above their WACC as a hurdle. IRR has weaknesses: it assumes cash is reinvested at the IRR itself, and projects with alternating positive and negative cash flows can have more than one IRR.