The internal rate of return method provides a rate of return that approximates:

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The internal rate of return method is a capital budgeting technique that calculates the discount rate that equates the present value of cash inflows with the present value of cash outflows, providing an estimate of the profitability and efficiency of an investment project. It is a dynamic method that considers the time value of money and the magnitude and timing of cash flows. Therefore, it does not approximate either the accounting rate of return, which is a static method that measures the average annual net income as a percentage of the initial investment, or the unadjusted rate of return, which ignores the time value of money.

The Internal Rate of Return Method Provides a Rate of Return