Internal Rate of Return (IRR)
The discount rate at which an investment's NPV equals zero.
What is Internal Rate of Return (IRR)?
The annualized effective return implied by a set of cash flows. Widely used in private equity and real estate, and easily gamed by timing capital calls - it assumes interim cash flows are reinvested at the IRR itself.
Internal Rate of Return (IRR): a worked example
$1M in, $2M out after 5 years is roughly a 15% IRR.
More terms in Valuation & Analysis
Market Capitalization
Share price times shares outstanding - the equity value of a company.
Earnings Per Share (EPS)
Net income attributable to each share of common stock.
Price-to-Earnings (P/E) Ratio
Price per share divided by earnings per share.
Dividend Yield
Annual dividends per share divided by share price.
Payout Ratio
The share of earnings paid out as dividends.
Book Value
Assets minus liabilities - the accounting value of equity.
Free Cash Flow
Operating cash flow minus capital expenditures.
EBITDA
Earnings before interest, taxes, depreciation, and amortization.