IRR is the rate of return at which NPV is zero or actual return of an investment.
MIRR is the actual IRR when the reinvestment rate is not equal to IRR
Internal Rate of Return
(IRR)
The Internal Rate of Return is used to measure an investment’s attractiveness. It is the interest rate
that makes the NPV equal to zero for the series of cash flows. At least one negative payment and one
positive receipt are required to calculate IRR. If this doesn’t exist, the result is null.
IRR is sometimes called the
discounted cash flow
rate of return, rate of return, and effective interest
rate. The “internal” term signifies the rate is independent of outside interest rates.
Depending on the number of cash flows and their values, IRR can require many iterations to generate
an accurate result. Microsoft Excel stops after 20 tries.
Suppose for an investment @ 12.24% discount rate the NPV is zero it means after generating 12.24%
return no money remains that means that actual return is 12.24% this actual return is called IRR.