Accounting Dictionary


Internal Rate of Return.

The internal rate of return is the percent the company thinks it can make if it invests in a certain project. If a new plant is expected to generate a 15% return and it costs 10% a year in interest to borrow the money, then the project would probably be profitable. The 15% would be the internal rate of return. It is calculated by computing the present value of all the cash flows the plant is expected to generate.

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