# internal rate of return

## Definitions

### Accounting

- noun an average annual yield of an investment, where the interest earned over a period of time is the same as the
__original cost__of the investment.

### Economics

- noun the discount rate at which the
__cost__of an investment and its future cash inflows are exactly equal.

### Health Economics

- (written as
*Internal Rate of Return*)That discount rate that makes the net present value of costs and benefits equal zero. Thus, with B

_{t}and C_{t}representing costs and benefits in year t, the annual internal rate of return is r^{*}in the formula:0 = S

_{t}(B_{t}- C_{t})/(1+ r^{*})See Discounting.

- synonymReturn on Investment