What is the "internal rate of return"?

The internal rate of return (IRR) is a parameter from investment valuation and enables the estimation of an average annual return for investment projects. In the Eturnity Platform, the IRR is calculated based on the generally applicable formula. For the calculation, all expected cash flows, i.e., income and expenses over the term of the project, are compared to the initial investment. The cash flows are discounted with the internal rate of return (cf. explanation under electricity production costs / production costs). To be able to evaluate the investment and calculate the internal rate of return, it is assumed that the net present value, i.e., the initial investment minus the discounted accumulated cash flows, must be 0.