Internal rate of return (IRR) and extended internal rate of return (XRR) are both methods used to calculate the profitability of an investment. However, there are some key differences between the two methods.
IRR is the discount rate that makes the net present value (NPV) of an investment equal to zero. It is calculated by discounting all of the cash flows from an investment back to the present and then finding the rate that makes the sum of the discounted cash flows equal to zero.