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Engineering ToolBox > Internal Rate of Return - IRR

Internal Rate of Return - IRR - a projects break-even interest rate

A primary measure of an investments worth 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 equates the Net Present Worth - NPW - of a projects cash flow in and out.

PW(i_rr) = PW_{cash in} - PW_{cash out} = 0 (1)

where

PW = Present Worth

i_rr = internal rate of return

 (1) can be expressed as

PW(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 = cash flow

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

Internal rate of Return - IRR - of a Cash Flow Stream - Online Calculator

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

Cash Flows - Period

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Minimum Attractive Rate of Return - MARR

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