Calculating the internal rate of return, or IRR, of an investment is a powerful tool for businesses. When a manager is faced with a capital intensive decision, IRR can quickly compare the financial ...

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.

Using a calculator, we see that the IRR of this investment would by approximately 15.1%, which is greater than the 10% required rate of return. Therefore, building the factory would be a good idea.

Calculating the IRR for a project with an initial outlay and single cash flow is very easy to do. It's also very practical for measuring the returns on investments in collectibles, commodities, ...