How IRR Reflects True Project Profitability

Internal Rate of Return (IRR) is a key metric to evaluate project profitability. Unlike simple profit margin, IRR accounts for the time value of money, providing a more accurate picture of investment performance. Feasibility models calculate IRR by discounting future cash flows to present value, helping developers compare projects with different cash flow timings. A higher IRR indicates a more attractive investment relative to the required discount rate. By focusing on IRR, developers and investors can prioritize projects that maximize returns, ensuring efficient capital allocation and sustainable growth.