Definitions for

**"Internal Rate of Return"****Related Terms:**Irr, Net present value, Npv, Discounted cash flow, Modified internal rate of return, Discounted cash flow analysis, Financial management rate of return, Profitability index, Cash-on-cash return, Dcf, Adjusted present value, Time-weighted rate of return, Terminal value, Average rate of return, Present value, Accounting rate of return, Reinvestment rate, Capitalization rate, Rate of return, Total rate of return, Capitalization, Nominal return, Return, Time value of money, Net cash flow, Ffo, Discounting, Hurdle rate, Weighted average cost of capital, Real return, Funds from operations, Total return, Income capitalization approach, Eva, Economic value added, Expected return, Cost of capital, Cash flow analysis, Burn rate, Overall capitalization rate, Free cash flow, Return on invested capital, Return on capital, Payback, Investment return, Investment, Direct capitalization, Immunization, Return on investment

IRR. The rate of return that would make the present value of future cash flows...

The discount rate that sets the net present value of the stream of net benefits equal to zero. The internal rate of return may have multiple values when the stream of net benefits alternates from negative to positive more than once.

A measure used in project evaluation. It is the annual percentage of profitability on the initial investment. Français: Taux de rendement interne Español: Tasa de rentabilidad interna (TRI)

In investments, the percentage rate at which an asset's earnings must be discounted, using present value techniques, in order to exactly repay the initial investment in the asset. For investments in insurance products, also known as return on investment (ROI). TO TOP

A discounted cash flow method used to specify the return rate for an investment, in which the present value of cash inflows are balanced against the present value of outflows.

The IRR method is the most appropriate method for calculating the returns of a private equity fund. In essence, the IRR represents the rate at which positive and negative cash flows are discounted so that the net present value of the fund amounts to zero.

A hypothetical average interest rate that needs to be earned on a sum of money (the present value) so that all of the payments called for in the future can be made.

The interest rate at which a project's net present value equals zero. It is also the interest rate at which the sum of the present values of the net cash flows equals the net investment. It is essentially the annual percentage rate of return on a capital budgeting project.

This is the interest rate which, when used as the discount rate for a series of cash flows, gives a net present value of zero. In other words, if we assume that we invest some money now (giving us an initial negative cash flow figure) and get some cash flows back in the future (giving us positive cash flow figures), it is the overall rate of growth on the investment.

Also referred to as the "compound annual return," it is a measure of the rate at which an investment or portfolio has grown in value over a period of years, averaged out on a yearly basis. (See compound annual return and average annual return.)

The most widely accepted measure for calculating private equity performance. This calculation is based on the cash flows made by investors to and from the fund. The cash flows are based on cash-in/cash-out returns over time, modified to include the residual value of the private equity fund's portfolio holdings.

("IRR") The return which can be earned on the capital invested in the project, i.e. the discount rate which gives an NPV of zero. This is equivalent to the yield on the investment. [D05006] RAMP Simple calculation of annual financial return for a given outlay without consideration of any external or related factor [D02883] RMW See Discounted Cash Flow. [D03061

The discount or interest rate at which the net present value of an investment is just equal to zero. See Interest Rate Formulae

An accounting term for the rate of return on an asset. It is defined as the interest rate that equates the present value of future returns to the initial investment. It is greatly affected by the timing of the exit.

The true annual rate of earnings on an investment. Equates the value of cash returns with cash invested. Considers the application of compound interest factors. Requires a trial-and-error method for solution.

Compounded rate of return on an investment that an... Add a comment

The discount rate that, when applied to the net cash flows of an investment, yields a net present value of zero. The internal rate of return represents the effective yield that a project provides in each time period on the net funds invested.

Internal rate of return indicates the business return according to alternative return that may be gained on the same investment. The internal rate of return is the discount rate that will create a zero net present value. In other words, the discount rate that we should enter in the Not Present Value (NPV) formula in order to get a result of NPV = 0.

The discount rate that equates the present value of an investment's future cash flows to the investment's cost; the rate of return on an investment, assuming that all intermediate cash flows are invested projects with an identical rate of return.

The rate of return that an investor can expect to earn on a particular project. It is an integral part of the “Discounted Cash Flow”.

the interest rate at which a certain amount of capital today would have to be invested in order to grow to a specific value at a specific time in the future.

The interest rat which equates the present value of the amounts invested in a project with the present value of the expected future cash flows.

As used in the Income Approach -- The conversion of a current stream of income along with a future stream of income into a discounted present value. The internal rate of return is a value interpretation in which the present value of the future income stream is equal to the opening investment. Internal rates of return provide a unique insight as to the current value of real property. One drawback however is that future incomes are extrapolated based on present income streams. This forecasted income stream is thus subject to many variables within the marketplace and is not estimated on actual future market data.

The discount rate that equates the present value of future cash flows with the market value of a financial instrument or the present valued cost of an investment.

The unique discount rate that equates the present value of a series of cash inflows (lease payments, purchase option) to the present value of the cash outflows (equipment or investment cost).

In a private equity fund, the net return earned by investors from the fundâ€(tm)s activity from inception to a stated date. The IRR is calculated as an annualised effective compounded rate of return, using monthly cash flows and annual valuations.

The interest rate that equates the present value of the net cash inflows from an investment project to the project's investment outlay (i.e., to the present value of its cost).

Equivalent to the compound rate of return of an investment

The rate of return that discounts all anticipated future net cash flows (including the reversion) back to a present value that equals the initial investment.

A return on an investment that is greater than the amount described in a contract or any other investment instrument. The internal rate-of-return is measured by the ability of the investor to reduce his internal expenses during the course of managing the investment; which means that the investor actually makes more than what is outlined in the contract or other investment instrument

A discount rate that, when applied to a series of future expected cash flows, results in a net present value of zero.

The interest rate an investment earns when the present value of all costs equals the present value of all returns That is, the Present Net Worth is equal to 0.

Also known as IRR, this is the discount rate which equates the present value of a future stream of payments to the initial investment. In bonds, the yield to maturity is an IRR.

Internal interest rate, whereby the cash value of the future capital income on an investment tallies with the current capital expenditure on the investment. The IRR influences the investment decision: investments should be made when the IRR is higher than the capital costs or the desired minimum yield.

The discount rate at which the net present value of an investment project is zero; thus, the internal rate of return represents the interest yield promised by a project over its useful life. This term is synonymous with time-adjusted rate of return.

(IRR) is a commonly used measure of investment quality in the market place. It factors the initial investment and estimated future after tax cash flows including sale proceeds after tax. To some, an investment is considered attractive if the IRR exceeds the cost of capital. Two problems exist with IRR. It assumes that after tax cash flows will be reinvested at the same rate as the investment being analyzed (which is often difficult to achieve) and the function can be erroneous when it encounters multiple sign changes and/or abnormally high positive or negative numbers.

The rate of return at which a project is expected to achieve break even or for which the net present value is zero.

A discount rate at which the net present value of an investment is zero. The IRR is a method of evaluating capital expenditure proposals.

The rate of discount that makes the net present value (NPV) equal to zero.

The dollar-weighted internal rate of return, net of management fees and carried interest generated by the CalPERS investment in the fund. This return considers the daily timing of all cash flows and CalPERS cumulative fair stated value, as of the end of the reported period.

A financial analysis technique that involves setting net present value at zero and finding a discount rate to satisfy the equality condition; that is, the discount rate that makes present value exactly equal to required initial cash outlay. This method fails when there are negative cash flows.

discount rate at which the net present value of a future cash flow is zero. Note: IRR is a special case of the ‘discounted cash flow' procedures.

The annualized yield rate of return or rate of return on capital that is generated or capable of being generated within an investment or portfolio over a period of ownership.

Different investors work this out in different ways but the term generally refers to the annual compound rate of return on an investment over a given period. Returns normally include dividend distributions and profits from either disposals or a fair valuation of the buy-out company.

The discount rate which equates the revenue streams of a project with the costs of the project, also known as Economic Rate of Return.

A widely used rate of return for performing economic analysis. This method solves for the interest rate that equates the equivalent worth of an alternative's cash receipts or savings to the equivalent worth of cash expenditures, including investments. The resultant interest rate is termed the internal rate of return (IRR).

A discount rate at which the present value of the future cash flows of the investment or opportunity equals the current market cost of the investment or opportunity. (Also called the â€œDollar Weighted Rate of Returnâ€)

the discount rate at which net present value equals zero

The annualized rate of return on capital which is generated or is capable of being generated internally within an investment or portfolio during the period of ownership. The calculation of I.R.R. involves the process of discounting the after-tax flows and after-tax net sale proceeds, so that the sum of their present value is equal to the initial investment.

A discounted cash-flow analysis calculation used to determine the potential total return of a real estate asset during an anticipated holding period

The percentage rate earned on each dollar that remains in an investment each year. The IRR of an investment is the discount rate at which the sum of the present value of future cash flows equals the initial capital investment.

1. The rate of interest (expressed as a percentage) at which all-future cash flows (positive and negative) must be discounted in order that the net present value of those cash flows should be equal to zero. It is found by trial and error by applying present values at different rates of interest in turn to the net cash flow. It is something called the discounted cash flow rate of return. 2. An alternative explanation might be: the highest rate of interest ( expressed as a percentage) at which funded f cash flow generated is to be sufficient to repay the original outlay at the end of the project life.

Technically, IRR is a discount rate: the rate at which the present value of a series of investments is equal to the present value of the returns on those investments.

The rate of return at which the present value of the cash inflows from an investment is exactly equal to the investment outlay.

That rate at which the current worth of all present and future investment costs equals the current worth of all present and future investment benefits.

The internal rate of return (â€œIRRâ€) is the annual percentage return achieved by a project, at which the sum of the discounted cash inflows over the life of the project is equal to the sum of the discounted cash outflows. A business that uses discounted cash flow techniques as a method of investment appraisal will often use a target IRR as a discount rate in evaluating potential investments or projects.

The average compound interest rate an investment earns over its duration. Also see “Benefit/cost ratio, Equal annual equivalent,” and “Net present value.

The discount rate that equates the present value of cash outflows with the present value of cash inflows.

IRR is defined mathematically as the rate by which future anticipated net cash flow must be discounted so that their value will be equal to the initial cost of the investment. IRR can also be described as a value of future cash flows in relation to the purchase of a property. This is also referred to as True rate of return on the capital invested.

A calculation of investment return including a calculation of market-rate comparative returns on periodic cash flow; return on capital invested based on the assumption that cash flow may be invested at a current assumed rate of return.

Dollar-weighted rate of return. Discount rate at which net present value (NPV) investment is zero. The rate at which a bond's future cash flows, discounted back to today, equals its price.

A measure of the return on an investment (or loan) which takes into account the time value of money by showing the rate of interest at which the present value of future cash flows is equal to the cost of the investment or loan.

An iterated calculation to approximate the interest rate at which Net Present Value (NPV) equals zero.

This is the rate of return at which the present value of expected net cash flows from a project equal its initial cash outlays; a measure of the rate of profit per rupee investment. It is also defined as the discount rate that makes NPV equal to zero.

Discount rate at which investment has zero net present value.

The internal rate of return, or hurdle rate, is the discount rate which, when applied to a series of future cash flows, produces a net present value of zero. The internal rate of return expresses an investor's holding period return requirements inclusive of ongoing cash flow and residual value.

The discount rate at which the present value of the future cash flows of an investment equals the cost of the investment. The discount rate with a net present value of 0.

The growth rate of your money over a time period relative to the amount invested. It is expressed as a percent gain or loss to be able to compare the profit to the amount invested. The IRR calculation is based on continuous compounding.

Method that determines the discount rate at which the present value of the future CASH FLOWS will exactly equal investment outlay.

The rate at which future cash flows must be discounted in order to equal the cost of the investment.

The rate that will discount all cash flows to a net present value of zero. To Top

The rate of return on asset investment, calculated by finding the discount rate that equates the present value of future cash flows to the cost of investment.

A method of determining investment yield over time, assuming a set of income, expense and property value conditions.

A method of measuring returns on investment that considers tax consequences.

A multi-year analysis of rate of return similar to Financial Management Rate of Return (FMRR). Used by investors in medium and large properties (occasionally on small properties). Multi-year cash flows and net sale proceeds are analyzed using discounted cash flow techniques to solve for the Financial Management Rate of Return (FMRR). IRRs and FMRRs are the best rate of return indicators, because they require an analysis of the investor's entire holding period, not just a single year. The discounting process takes into consideration the time value of money and thereby produces a more realistic rate of return.

The theorem of internal rate of return is, in effect, compounding interest in reverse, or discounting. In contemplating a current investment with a proposed investment, IRR is a most efficient evaluation. The rate of return on a proposed investment should be equal to the present value of all future benefits, including revenues, as well as the gross costs associated with the (current) property investment. IRR is important in planning capital outlays, as well as evaluating rental real estate investments.

The discount rate that needs to be applied to bring the net present value of an investment in line with the price paid.

The rate of compound interest at which the company's outstanding investment is repaid by proceeds from the project.

The discount rate of interest which makes the net present value of an investment exactly zero.

Real annual return on a real estate investment. It equates the initial investment with the present value of future net cash inflows from the investment.

The internal rate of return (IRR) is a capital budgeting method used by firms to decide whether they should make long-term investments.

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