IRR

IRR (1)

The ISO 4217 currency code for the Iranian Rial.

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IRR (2)

See: Internal rate of return

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IRR

ISO 4217 code for the Iranian rial. Issued to replace the qiran in 1932, it was pegged to the British pound at various rates until 1945. After this, it was pegged to the U.S. dollar until 1975. Since the Islamic Revolution in 1979, the rial has been marked by high inflation and low value.

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IRR

See internal rate of return.

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Internal Rate of Return (IRR)

What Does Internal Rate of Return Mean?

The discount rate often used in capital budgeting that makes the net present value of all cash flows from a particular project equal to zero. Generally, the higher a project's internal rate of return is, the more desirable it is to undertake. Thus, IRR can be used to rank potential projects. Assuming all factors are equal, the project with the highest IRR probably would be considered the best and would be undertaken first. IRR sometimes is referred to as the economic rate of return (ERR).

Investopedia explains Internal Rate of Return

One can think of IRR as the rate of growth a project is expected to generate. Although the actual result may differ from the estimated IRR rate, a project with a substantially higher IRR value than other available options still will provide a much better chance for strong growth. IRRs also can be compared against prevailing rates of return in the securities market. If a firm cannot find any projects with IRRs greater than the returns that can be generated in the financial markets, it may choose to invest its retained earnings in the market.

Related Terms:
• Discount Rate
• Discounted Cash Flow—DCF
• Interest Rate
• Modified Internal Rate of Return—MIRR
• Present Value Interest Factor—PVIF