Internal Rate of Return
Internal Rate of Return (IRR) is a financial metric used to estimate the profitability of potential investments by calculating the discount rate that makes the net present value (NPV) of all cash flows from a project equal to zero. It represents the annualized effective compounded return rate an investment is expected to generate, helping compare the efficiency of different capital investments. IRR is widely used in capital budgeting, corporate finance, and investment analysis to evaluate project viability.
Developers should learn IRR when working on financial applications, investment platforms, or business analytics tools that require investment analysis, portfolio management, or project evaluation features. It's essential for building features like investment calculators, financial modeling dashboards, or automated decision-making systems in fintech, real estate, or corporate finance software. Understanding IRR helps developers implement accurate financial calculations and create user-friendly interfaces for investment performance metrics.