Internal Rate of Return (IRR) is the discount rate at which NPV is equal to Zero. The logic is If at a discount rate NPV is positive, it means that the actual rate of return is greater than the discount rate. If the NPV is negative, it means that the actual rate of return is less than the discount rate. If the NPV is Zero, it means that actual rate of return is neither greater than nor less than the discount rate. Hence IRR represents the actual rate of return earned on an investment.
A project will be selected if the IRR is greater than targeted rate of return
Between two project a project with higher IRR will be selected
A project will be selected if the IRR is greater than targeted rate of return
Between two project a project with higher IRR will be selected
