Net IRR is a way of gauging the performance of a project or investment based on its discounted future cash flows. The Net IRR is simply the difference between the Internal Rate of Return (IRR) and the Weighted Average Cost of Capital (WACC).The WACC is used as a discount rate because it represents the minimum return that shareholders expect to earn on their investment. The higher the WACC, the higher net present value will be required for an investment to be accepted. In other words, if two projects have equal NPVs but different costs of capital, the one with lower cost will have higher net internal rate of return. This makes intuitive sense - if you can get a better return elsewhere with less risk, you're more likely to take that option.The Net Internal Rate Of Return takes into account both positive and negative cash flows over time in order to give investors an idea about how well their money will grow if they choose to invest in a certain project or company. It's important to remember that just because something has a high Net IRR doesn't mean it's necessarily going to be profitable - there are other factors at play such as market conditions and overall business health."
