Internal Rate of Return - IRR
Internal Rate of Return (IRR) - the break-even interest rate.
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
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 ) = F 0 / (1 + i rr ) 0 + F 1 / (1 + i rr ) 1 + F 2 /(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.
Cash Flow Internal Rate of Return Calculator
- money out - negative values
- money in - positive values
Download and print Present Value of Future Payment chart
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.
