Internal Rate of Return (IRR)

The discount rate at which an investment NPV equals zero.

IRR is the annualized return that makes the present value of an investment cash flows equal its cost. Projects with an IRR above the required hurdle rate are generally accepted. It is intuitive but can mislead when cash flows are irregular or projects differ in scale.

The fund accepted the deal because its Internal Rate of Return (IRR) comfortably exceeded the firm's hurdle rate.