What Is IRR? IRR, or internal rate of return, is a metric used in financial analysis to estimate the profitability of potential investments. IRR is a discount rate that makes the net present value (NPV) of all cash flows equal to zero in a discounted cash flow analysis . IRR calculations rely on the same formula as NPV does. Keep in mind that IRR is not the actual dollar value of the project. It is the annual return that makes the NPV equal to zero. Generally speaking, the higher an internal rate of return, the more desirable an investment is to undertake. IRR is uniform for investments of varying types and, as such, can be used to rank multiple prospective investments or projects on a relatively even basis. In general, when comparing investment options with other similar characteristics, the investment with the highest IRR probably would be considered the best. Key Takeaways The internal rate of return (IRR) is the annual rate of growth that an investment is expected to gener
What Does Per Diem Mean? A per diem, from the Latin for “by the day,” is a daily allowance paid to an employee to cover costs incurred while on a business trip. Covered business expenses typically include accommodation, food, and incidental expenses such as fees and tips for services. The term per diem can also refer to a compensation system in which an employee is paid per day worked as opposed to receiving a weekly salary. Many companies and their employees prefer a flat per diem to the more burdensome requirement for submitting itemized expense accounts. Key Takeaways Per diems are daily allowances for the costs of business travel. Per diems cover business expenses for accommodations, meals, and incidentals. Companies may provide a company credit card, full or partial expense coverage, or fixed daily rates. Most firms use the standard rates set by the federal government as a guideline for their per diems. Per diem payment also refers to compensation received by workers who are p