The internal rate of return (IRR) attempts to remove the uncertainty in the assumption of opportunity rate. The IRR is the 'annualized effective compounded return rate' or the rate of return that makes all cash flows equal to zero. The IRR is determined using an iterative process similar to how the Excel IRR function works. If an IRR is greater than the 'owners cost of capital' than the IRR indicates that this option is economically viable.