Most IRR analyses will be done in conjunction with a view of a company’s weighted average cost of capital (WACC) and NPV calculations. IRR is typically a relatively high value, which allows it to arrive at an NPV of zero. Most companies will require an IRR calculation to be above the WACC.

What is included in IRR?

The IRR is the interest rate (also known as the discount rate) that will bring a series of cash flows (positive and negative) to a net present value (NPV) of zero (or to the current value of cash invested). Using IRR to obtain net present value is known as the discounted cash flow method of financial analysis.

Is IRR same as return?

IRR is the rate of return that equates the present value of an investment’s expected gains with the present value of its costs. It’s the discount rate for which the net present value of an investment is zero.