IRR (Internal Rate of Return)

Rather than assuming a rate and calculating NPV, IRR works backward: it finds the exact rate at which a set of cash flows' NPV becomes zero - that rate is the investment's effective annualized return. A project or investment is generally considered worthwhile if its IRR is higher than the return you could get elsewhere (or your cost of borrowing) for similar risk. IRR assumes cash flows occur at regular intervals; if you've come across XIRR in this app's own investing content, that's the specific version of this same idea built to handle SIP-style cash flows that arrive on irregular dates and in irregular amounts - IRR is the general concept, XIRR is one particular application of it.