IRR (Internal Rate of Return) is the discount rate that makes the Net Present Value (NPV) of an investment equal to zero. It represents the return rate that the investment itself can generate, and is one of the most important investment evaluation metrics in financial analysis.
IRR is the discount rate r satisfying: -C₀ + Σ(Cₜ/(1+r)^t) = 0
Since this equation usually cannot be solved analytically, this tool uses the Newton-Raphson iteration method with precision up to 0.0001%.
IRR (Internal Rate of Return) is the discount rate that makes the NPV of an investment equal to zero. IRR higher than the cost of capital indicates a viable investment, IRR lower than cost of capital indicates an unviable one.
IRR is the discount rate r satisfying -C₀+Σ(Cₜ/(1+r)^t)=0. Since this equation usually cannot be solved analytically, this tool uses the Newton-Raphson iteration method with precision up to 0.0001%.
They complement each other. NPV gives the absolute value amount, suitable for comparing projects of different scales; IRR gives the percentage return rate, suitable for judging a single project's return level. When conclusions conflict, NPV takes precedence.
When cash flow signs change more than once (e.g., invest, then returns, then invest again), IRR may have multiple solutions. In such cases, use NPV analysis or MIRR instead.
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