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Internal Rate of Return
Source: Encyclopedia of Banking & Finance (9h Edition) by Charles
J Woelfel
(We recommend this as work of authority and you can order
it here)
The rate
of interest at which the present value of expected net cash flows from
a project equals its initial cash outlays; a measure of the rate of profit
per dollar of investment. In
evaluating a proposed investment, the internal rate of return is computed
to the minimum desired rate of return to determine whether a project should
be accepted or rejected. If
the internal rate of return is equal to or greater than the minimum desired
rate of return, the project is desirable.
If not, the project is not desirable.
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