Internal rate of return

The internal rate of return (IRR) also known as the Economic rate of return (ERR) is used to rank a company’s potential projects from most attractive to least attractive.

What it is is the estimated growth rate a project will have for the company. The projects that have a higher growth rate obviously look more attractive to a company and therefore are listed accordingly.

The internal rate of return will often times differ from reality but it does give a good estimate for the project and projects that are estimated to bring in a higher return will probably be more successful then projects estimated to bring in a lower return.