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 (NPV) of all cash flows from the investment equals zero. In simpler terms, IRR is the expected annual rate of return that makes the investment break even. Investors often use IRR to compare different investment opportunities. A higher IRR indicates a more attractive investment, while a lower IRR suggests less potential for profit. It is commonly used in capital budgeting and project evaluation to help make informed financial decisions.