Internal Rate of Return Notes: Definitions & Explanations PDF | Download eBooks
Study Internal Rate of Return lecture notes PDF with project management definitions and explanation to study “What is Internal Rate of Return?”. Study internal rate of return explanation with project management terms to review project management course for online MBA programs.
Internal Rate of Return Definition:
Internal rate of return is the discount rate where the present value of the cash inflows exactly equals the initial investment.
Project Management: A Systems Approach to Planning, Scheduling, and Controlling by Harold Kerzner?
Internal Rate of Return Notes:
In order to select a project among all the opportunities and alternatives, a selection criteria is used that is pre-defined. There are different methods to select a project. One way of doing it is to identify the costs and benefits (both financial and non-financial) associated with the alternatives and compare them in order to make a trade-off between the two. A trade-off method which is used for the financial benefits is called capital budgeting. Capital budgeting, in turn, also involves some methods. One of them is internal rate of return. Internal rate of return is the rate at which the present value of all the positive and negative cash flows of the project are zero. The word 'internal' with rate of return means that no external factors are considered in the calculations. Internal rate of return is the most sophisticated method of capital budgeting.
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