Securing Hannav Ledger...
Securing Hannav Ledger...
Glossary
Internal Rate of Return is the discount rate that makes the net present value of all cash flows from an investment equal to zero.
IRR is the break-even return rate for a project or investment — if your cost of capital is below IRR, the investment is generally attractive.
IRR assumes reinvestment at the same rate, which may not hold in practice. For periodic equal intervals, IRR applies; for irregular flows like SIPs, XIRR is the appropriate Indian investor metric.
You invest ₹5 lakh in a rental property, receive ₹60,000 yearly for 5 years, and sell for ₹5.5 lakh. IRR might be 9.2%, meaning the project earns 9.2% annually on cash flows.
IRR assumes equal time gaps between cash flows. XIRR handles actual dates, making it better for real-world Indian investment schedules.
Yes, with unconventional cash flows (alternating inflows and outflows), multiple IRR solutions can exist, reducing interpretability.
Higher IRR suggests better returns on paper, but consider risk, liquidity, and scale. A small high-IRR bet may add less wealth than a moderate-IRR large allocation.