The internal rate of return, or IRR, allows investors to analyze the profitability of investments and companies to analyze the profitability of capital outlays. The easiest way to understand IRR is by ...

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IRR measures the rate needed to break even on an investment. Calculate IRR by setting NPV to zero and solving for the discount rate. Use Excel's IRR function by inputting initial cost and cash inflow.

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IRR calculates the return rate at which a project's net value totals zero. Using Excel's XIRR, FoolCo finds buying new machinery earns a higher IRR of 26.5%. IRR considerations exclude cash flow ...