Internal rate of return

The discount rate at which a project's net present value is zero. It expresses return as a percentage, which is why it is the standard language of private equity.

The project above has an internal rate of return of about 18.0%.

The measure has two well-documented defects. It assumes interim cash flows are reinvested at the same rate, which flatters high-return projects. And it can produce multiple answers, or none, where the cash flow signs change more than once.

It also ignores scale. A 40% return on ₹5 crore is worth less than a 15% return on ₹500 crore, and a manager rewarded on percentage return will pick the wrong one.

Rank by net present value. Report the internal rate as context.