IRR - internal rate of return is the discount rate that brings down the net present value of an investment to zero. This turns out to be the break-even point at which the investment yield neither gains nor losses. To find this investment rate you would have to enter a series of cash flows and the guess rate ( a default guess rate of 10% is employed when finding the IRR). The reason you would require this guess is due to the lack of a IRR formula to find internal rate of return. This leads to hiring some complicated numerical methods that perform iterative calculations starting with a guess rate of 10%. When such repeated calculation converge then we have found one of the IRR values but it is not for certain that such as a value will be found. In such cases you would have to enter a different value for the guess rate so to enable the IRR calculator to redo such iterative calcualtions. The online IRR calculator will accept a series of cash flows and the guess rate of 10% and process such information using the IRR formula and return a detailed workout that was performed internally to calculate the IRR.

#### Data input

%

#### Data ouput

f'(r) = -50(1+r)^-2 -80(1+r)^-3 -90(1+r)^-4 -40(1+r)^-5

r0 = 0.1

f(r0) = 7.882

f'(r0) = -187.7356

r1 = 0.1 - 7.882/-187.7356 = 0.1419844551017

Error Bound = 0.1419844551017 - 0.1 = 0.041984 > 0.000001

r1 = 0.1419844551017

f(r1) = 0.4788

f'(r1) = -165.5692

r2 = 0.1419844551017 - 0.4788/-165.5692 = 0.14487617020274

Error Bound = 0.14487617020274 - 0.1419844551017 = 0.002892 > 0.000001

r2 = 0.14487617020274

f(r2) = 0.002

f'(r2) = -164.1783

r3 = 0.14487617020274 - 0.002/-164.1783 = 0.14488844256652

Error Bound = 0.14488844256652 - 0.14487617020274 = 1.2E-5 > 0.000001

r3 = 0.14488844256652

f(r3) = 0

f'(r3) = -164.1725

r4 = 0.14488844256652 - 0/-164.1725 = 0.14488844278586

Error Bound = 0.14488844278586 - 0.14488844256652 = 0 < 0.000001

IRR = r4 = 0.14488844278586 or 14.49%