Internal Rate of Return (IRR)

Discount rate at which NPV equals zero — used to evaluate investment attractiveness

IRR (Internal Rate of Return) is the discount rate at which an investment's NPV equals zero. The higher the IRR, the more attractive the investment. Rule: if IRR > WACC, the investment is profitable.

IRR > WACC → accept investment
IRR < WACC → reject investment

Required rate (WACC): 10%
Project IRR: 18%
Verdict: profitable — IRR > WACC

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