IRR
Finds the discount rate at which a series of cash flows nets out to zero present value. The first value is period 0 (the upfront investment, entered as a negative number), and the result is a decimal rate (0.152 means 15.2%). It needs at least two cash flows, and the series should change sign at least once (money out, then money in), or no rate can balance the flows.
Inputs
| Input | Accepts | Required |
|---|---|---|
CashFlows | Series (a list of numbers) | Yes |
Outputs
| Output | Produces |
|---|---|
Result | Value (a single number) |
Example
A machine costs $500,000 and generates $150,000 of cash flow in each of the next five years. Wire in the column (-500000, 150000, 150000, 150000, 150000, 150000) and the result is about 0.152, a 15.2% internal rate of return. Show it on a KPICard next to your cost of capital: if the IRR clears WACC, the investment earns more than the capital costs.
Tips
The rate is solved iteratively, so unusual cash flow patterns (multiple sign changes, or flows that never turn positive) can fail to converge and report an error rather than a misleading number. Compare against NPV at your actual discount rate when the pattern is irregular.