The Internal Rate of Return (IRR) is a financial metric used to evaluate the profitability of an investment. It represents the discount rate at which the net present value of all cash flows from the investment equals zero. In simpler terms, IRR helps investors understand the expected annual return on an investment over time. Investors often compare the IRR to a required rate of return or the cost of capital to determine if an investment is worthwhile. If the IRR exceeds the required rate, the investment is generally considered favorable. Conversely, if it falls below, it may not be a good choice.