Technically speaking, IRR is the discount rate when the present value of the cash inflows equals the original investment. When choosing between projects or when choosing alternative methods of doing the project, projects with higher IRR values are generally considered better than projects with low IRR values.
Three facts concerning IRR:
- IRR is the discount r NN ate when NPV equals zero.
- IRR assumes that cash inflows are reinvested at the IRR value.
- You should choose projects with the highest IRR value.
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