The internal rate of return (IRR) is the interest rate at which the net present value (NPV) of a series of cash flows becomes zero. It is commonly used to evaluate the profitability of an investment or project. The formula used to calculate IRR is complex, involving trial and error or numerical methods to find the rate that balances the NPV to zero. The higher the IRR, the more attractive the investment.
Parameter
Beschreibung
Beispiel-Wert
Anfangsinvestition
The initial amount of money invested.
$10,000
Net Cash Flows
The net cash flows received over each period (year 1: $2,000, year 2: $3,000, year 3: $4,000).
$2,000, $3,000, $4,000
Anzahl der Perioden
The number of periods over which the investment is held.
3 Jahre
IRR
The internal rate of return that makes the net present value (NPV) of all cash flows equal to zero.
