Meeting or exceeding which rate indicates a successful investment via IRR?

The internal rate of return (IRR) is a critical metric used in evaluating the profitability of an investment. A successful investment is typically indicated by an IRR that meets or exceeds the required rate of return. This required rate of return reflects the minimum return investors expect on their investment considering the risks involved.

When the IRR surpasses the required rate of return, it signals that the investment is anticipated to generate sufficient earnings relative to its costs and risks, thereby making it a favorable option. For investors, this benchmark is essential to ensure that the investment is aligned with their financial goals and risk tolerance.

The other options, while important in their contexts, do not specifically address the threshold for investment success as defined by IRR. The market vacancy rate, historical cap rate, and average interest rate provide different forms of market insights, but they do not serve as the direct comparison point for determining if an investment’s return is satisfactory against what investors expect in terms of returns. The required rate of return remains the definitive standard for evaluating the success of an investment through the lens of IRR.