What is meant by an investment project's internal rate of return? How is the internal rate of return computed? and EU Foreign Direct Investment [SEMINAR]

What is meant by an investment project's internal rate of return? How is the internal rate of return computed?

What is meant by an investment project's internal rate of return? How is the internal rate of return computed?


Investment best answer:

Answer by Adam
The internal rate of return is the percentage rate that equates a given project's net present value to zero. It is very difficult to calculate without a financial calculator or Microsoft Excel. Using Excel, calculate the IRR by listing out the project's cash flows and the period in which they occur:

Period Amount
0 -1000 (negative because it is the projects initial outflow)
1 100
2 200
3 300
4 400
5 300
6 200

Then, using the IRR function, select the dollar amounts, and hit enter. Your IRR is 12%.

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