IRR (Internal Rate of Return) is a financial metric used to estimate the profitability of an investment. Also, the IRR (Internal Rate of Return) is a discount rate that makes the net present value (NPV) of the cash flows equal to zero. It is an ideal measure for analyzing capital budgeting projects. Furthermore, it helps in comparing the potential annual rate of return over time.  For companies, if the IRR is higher or equal to the cost of capital, then the project or investment is considered to be a profitable one and vice versa. However, there are other qualitative and quantitative factors for making investment decisions.   For investors, a good internal rate of return for any investment is anything over and above the risk-free rate of return. Also, one should keep in mind that this return can beat inflation. Therefore, the investor’s actual gain will be the real rate of return above the risk-free rate of return and inflation rate. Furthermore, the investor must compare the IRR with a similar alternative investment to analyze whether the IRR is good or bad.