# Internal Rate of Return - IRR

A primary measure of an investments worth (or value) is based on yield and known as the * internal rate of return - IRR * .

The * internal rate of return * can be defined as the * break-even interest rate * which equals the Net Present Worth - NPW - (Net Present Value) of a project in and out cash flows.

P(i_{ rr }) = F_{ cash_in }- F_{ cash_out }

= 0 (1)

where

i_{ rr }= internal rate of return

F_{ cash_in }= future cash flow in ( discounted )

F_{ cash_out }= future cash flow out ( discounted)

* (1) * can be expressed as

P(i_{ rr }) = F_{0 }/ (1 + i_{ rr })^{ 0 }+ F_{ 1 }/ (1 + i_{ rr })^{ 1 }+ F_{2}/(1 + i_{ rr })^{2}+ .... + F_{ n }/(1 + i_{ rr })^{ n }

= 0 (2)

where

F_{0..n }= cash flow in period 0 to n (positive value for cash flow in - negative value for cash flow out)

For a given cash flow equation * (2) * can be solved by iteration.

### Cash Flow Internal Rate of Return Calculator

- money out - negative values
- money in - positive values

Cash Flows - * Period *

Download and print Present Value of Future Payment chart

### Minimum Attractive Rate of Return - MARR

* Minimum Attractive Rate of Return - MARR * - represents the required or minimum acceptable Internal Rate of Return for a project investment.

## Related Topics

### • Economics

Engineering economics - cash flow diagrams, present value, discount rates, internal rates of return - IRR, income taxes, inflation.

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