What is the Internal Rate of Return (IRR)

What is IRR

The Internal Rate of Return (IRR) is the rate of return you earn on your project.

The Internal Rate of Return (IRR) is the return such that NPV is zero.
An investment is worthwhile if IRR is greater than R, the next best competing alternative.

The rate of return is internal because it is the rate of return specific to the project. All that is needed is the cash flows for that project. Compared it to NPV, which requires cash flows and the discount rate, r.

Decision Making using IRR

IRR by itself doesn't mean anything.
IRR needs to be compared to r.
When IRR > r, then the idea/project is worth pursuing because NPV will be positive.