Internal Rate of Return - IRR

Internal Rate of Return (IRR) - the break-even interest rate.

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

P = Present Worth (Value)

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 ) = F₀ / (1 + i _rr ) ⁰ + F₁ / (1 + i _rr ) ¹ + F₂/(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.

Internal Rate of Return Diagram

Cash Flow Internal Rate of Return Calculator

money out - negative values
money in - positive values

Make a Shortcut to this Calculator on Your Home Screen?

Present Value of Future Payment chart

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 Documents

Accounting Rate of Return
Net income vs net investment.
Cash Flow Diagrams
The future value of money.
Contract Types
Commonly used engineering and construction contracts.
Discrete Compounding Cash Flow Formulas
Discrete payments compounding equations and online calculators .
Interest Formulas
Future value of single cash flow.
Interest Rate
Interest rate is the cost of money.
Net Present Worth (NPW) of a Cash Stream
The value of a stream of payments is called the Net Present Worth (NPW).
Present Value
The value of money in the future is the Present Value.
Uniformat
The ASTM E1557 UNIFORMAT II Standard.
Value Engineering
Improved value by enhanced function.

Engineering ToolBox - SketchUp Extension - Online 3D modeling!

3D Engineering ToolBox Extension to SketchUp - add parametric components to your SketchUp model

Add standard and customized parametric components - like flange beams, lumbers, piping, stairs and more - to your Sketchup model with the Engineering ToolBox - SketchUp Extension - enabled for use with older versions of the amazing SketchUp Make and the newer "up to date" SketchUp Pro . Add the Engineering ToolBox extension to your SketchUp Make/Pro from the Extension Warehouse !

We don't collect information from our users. More about

We use a third-party to provide monetization technologies for our site. You can review their privacy and cookie policy here.

You can change your privacy settings by clicking the following button: .

Internal Rate of Return - IRR