Formula
0 = āCā + Ī£ CF_t / (1 + IRR)^t
IRR is the discount rate that makes NPV equal to zero.
Example
An initial investment of 1000 with annual inflows of 400 over 3 years gives an IRR around 19.43%.
FAQs
What is IRR used for?
It helps compare the efficiency of different investment opportunities.
How is it different from ROI?
ROI is a simple percentage gain; IRR accounts for the timing of cash flows.