what is a good internal rate of return 
whether an irr is good or bad will depend on the cost of capital and the opportunity cost of the investor for instance a real estate investor might pursue a project with a 25 irr if comparable alternative real estate investments offer a return of say 20 or lower however this comparison assumes that the riskiness and effort involved in making these difficult investments are roughly the same if the investor can obtain a slightly lower irr from a project that is considerably less risky or time consuming then they might happily accept that lower irr project in general though a higher irr is better than a lower one all else being equal the bottom linethe internal rate of return irr is a metric used to estimate the return on an investment the higher the irr the better the return of an investment as the same calculation applies to varying investments it can be used to rank all investments to help determine which is the best the one with the highest irr is generally the best investment choice irr is an important tool for companies in determining where to invest their capital companies have a variety of options to help grow their business these include building out new operations improving existing operations making acquisitions and so on irr can help determine which option to choose by showing which will have the best return 