The Internal Rate of Return (IRR) is a key financial metric used in evaluating investment opportunities and projects. It represents the rate of growth an investment is expected to generate on an annual basis. More precisely, the IRR is the discount rate that makes the Net Present Value (NPV) of all the cash flows generated by an investment or project equal to zero. Calculating the IRR involves solving for the discount rate where the present value of cash outflows (initial investment) equals the present value of cash inflows (returns). For example, if an investment into a project generates varying amounts of returns over several years, the IRR helps determine whether the rate of return meets or exceeds a required threshold, such as the company's cost of capital. It often serves as a comparison tool to rank multiple projects and investments or to decide whether the investment is worth pursuing.