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Project Management & Agile · Intermediate

Internal Rate of Return (IRR)

The discount rate at which a project's net present value equals zero.

Definition

Higher IRR is better; a project is attractive if its IRR exceeds the organization's cost of capital or hurdle rate.

Example

Project with IRR 18% vs. hurdle rate 12% is acceptable.

Exam tip

Choose the highest IRR when comparing projects on that criterion.

Related terms