Defined term

Internal rate of return

Internal rate of return is a discount rate at which the net present value of a specified cash-flow series equals zero, when such a solution is defined.

Also known as IRR

economics · Concept code GS-CONCEPT-074 · Last verified August 20, 2026

Definition and boundaries

Definition

Internal rate of return is a discount rate at which the net present value of a specified cash-flow series equals zero, when such a solution is defined.

Definition claim verification: Verified August 20, 2026

In plain language

Use Internal rate of return only after the cash-flow perspective, timing, contract structure, included costs, and omitted items are made explicit.

What it is not

It is not an annual savings rate, loan APR, or guaranteed investment return.

Decision context

Why it matters

Cash-flow sign patterns can produce no solution or multiple solutions, and the metric omits an external reinvestment assumption unless one is added separately.

Decision-context claim verification: Verified August 20, 2026

Information boundary

This page provides general educational context, not a site design, production guarantee, utility determination, contract interpretation, legal opinion, tax conclusion, or individualized financial advice. Verify property, equipment, utility, jurisdiction, program, and agreement details before acting.

Concept relationships

Affects

  • Payback periodPublished conceptInternal rate of return can affect how Payback period is evaluated

Primary sources

What to do next

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