internal rate of return is the discount rate that the total present value of capital inflow is equal to the total present value of capital flow, and the net present value is equal to zero, that is, the discount rate is zero.

Internal Rate of Return (IRR) is the discount rate that the total present value of capital inflow is equal to the total present value of capital flow, and the net present value is equal to zero. If the computer is not used, the internal rate of return will be tried by several discount rates until the discount rate with net present value equal to or close to zero is found. Internal rate of return (IRR) is a desired rate of return for an investment and a discount rate that can make the net present value of an investment project equal to zero.

1. It is the desired rate of return for an investment, and the bigger the index, the better. In general, the project is feasible when the internal rate of return is greater than or equal to the benchmark rate of return. The sum of the discounted cash flows of investment projects in each year is the net present value of the project, and the discount rate when the net present value is zero is the internal rate of return of the project. In the project economic evaluation, according to the different levels of analysis, the internal rate of return can be divided into financial internal rate of return (FIRR) and economic internal rate of return (EIRR).

2. At present, investment methods such as stocks, funds, gold, real estate and futures have been familiar and used by many wealth managers. However, many people's understanding of the effectiveness of investment is limited to the absolute amount of income, lacking scientific judgment basis. For them, the internal rate of return (IRR) indicator is an indispensable tool.

3. The internal rate of return is a macro-conceptual indicator, and the most popular understanding is the ability of the project investment income to withstand currency depreciation and inflation. For example, the internal rate of return of 1% means that the project can withstand the maximum currency depreciation of 1% or inflation of 1% every year during its operation.

4. At the same time, the internal rate of return also indicates the ability to resist risks during the operation of the project, for example, the internal rate of return is 1%, which means that the maximum risk that the project can bear every year during the operation is 1%. In addition, if a loan is needed in the project operation, the internal rate of return can represent the maximum tolerable interest rate. If the loan interest is included in the project economic calculation, it means the maximum floating value of the loan interest in the future project operation.

5. For example, if the internal rate of return is based on 8% and inflation is assumed to be around 8%. If it is equal to 8%, it means that when the project operation is completed, there is no money except the "salary" taken by "oneself", but it is still feasible. If it is less than 8%, it means that there is a great possibility of losing money when the project operation is completed. Because of inflation, the money you earn in the future will probably not cover the cost you put in. Projects with long investment return period are particularly important for internal rate of return. For example, the general investment payback period of hotel construction is about 1-15 years, and the investment and operation period of large-scale tourism development is more than 5 years. This is the most popular and practical significance of internal rate of return.