The internal rate of return (IRR) is a measure of an investment’s rate of return. The term internal refers to the fact that the calculation excludes external factors, such as the risk-free rate, inflation, the cost of capital, or various other financial risks.
IRR is designed to account for the timeline of investments. A given return on investment received at a given time is worth more than the same return received at a later time, so the latter would yield a lower IRR than the former