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# Internal Rate of Return - IRR

A primary measure of an investments worth (or value) 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 equals the Net Present Worth - NPW - (Net Present Value) of a project in and out cash flows.

P(i rr ) = F cash_in - F cash_out

= 0                    (1)

where

P = Present Worth (Value)

i rr = internal rate of return

F cash_in = future cash flow in ( discounted )

F cash_out = future cash flow out ( discounted)

(1) can be expressed as

P(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 0..n = cash flow in period 0 to n (positive value for cash flow in - negative value for cash flow out)

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

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### Cash Flow Internal Rate of Return Calculator

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

Cash Flows - Period

### Minimum Attractive Rate of Return - MARR

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

## Related Topics

### • Economics

Engineering economics - cash flow diagrams, present value, discount rates, internal rates of return - IRR, income taxes, inflation.

## Related Documents

### Accounting Rate of Return

Net income vs net investment.

### Cash Flow Diagrams

The future value of money.

### Contract Types

Commonly used engineering and construction contracts.

### Discrete Compounding Cash Flow Formulas

Discrete payments compounding equations and online calculators .

### Interest Formulas

Future value of single cash flow.

### Interest Rate

Interest rate is the cost of money.

### Net Present Worth (NPW) of a Cash Stream

The value of a stream of payments is called the Net Present Worth (NPW).

### Present Value

The value of money in the future is the Present Value.

### Uniformat

The ASTM E1557 UNIFORMAT II Standard.

### Value Engineering

Improved value by enhanced function.

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