Finances · Glossaire
What is IRR (Internal Rate of Return)?
Définition rapide
The discount rate that makes the net present value of all cash flows from a project equal to zero. Used in capital budgeting.
Explication complète
IRR (Internal Rate of Return) is the annual rate of growth an investment is expected to generate. It is the discount rate at which the sum of all future cash flows (positive and negative) equals the initial investment. If a project costs $1,000 today and returns $1,100 in one year, IRR = 10%. IRR is widely used in corporate finance to rank projects: a project with 18% IRR is preferred over one with 12% IRR, assuming both are above the company's cost of capital. NPV (Net Present Value) is the alternative: it shows the dollar value created, not a percentage. When IRR and NPV conflict, NPV is generally preferred.
Calculatrices liées
Calculators that use or explain IRR.
Termes liés
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APR (Annual Percentage Rate)
The yearly cost of a loan, expressed as a percentage, including most fees. Used when borrowing money.
APY (Annual Percentage Yield)
The yearly return on a deposit or investment, including the effect of compounding. Used when saving money.
Compound Interest
Interest calculated on the initial principal AND on the accumulated interest from previous periods. The engine of long-term wealth.
Simple Interest
Interest calculated only on the original principal, not on accumulated interest. Used in short-term and consumer loans.
Principal
The original sum of money borrowed or invested, not including interest. The base on which interest is calculated.
Amortization
Spreading loan payments over time so each payment covers both principal and interest, with the loan fully paid off at the end.
Last reviewed: June 15, 2026 • Category: Finances