The internal rate of return (IRR) is a metric used in capital budgeting to estimate the return of potential investments. Here is the formula for calculating it.

Internal Rate of Return (IRR) is a formula used to evaluate the returns of a potential investment. ... but a simple definition of IRR is that it's an expected return rate that accounts for time, ...

Internal Rate of Return (IRR) is a formula used to evaluate the returns of a potential investment. ... but a simple definition of IRR is that it's an expected return rate that accounts for time, ...

Learn how to calculate the internal rate of return (IRR) in Excel and how it’s used to determine whether a capital investment can be profitable.

Calculating the IRR, or an investment’s expected annual rate of growth, is no easy task for investors. Find the formula and tips for calculating IRR.

IRR = (Expected Cash Flow ÷ Initial Outlay)^(1 ÷ Number of Periods)-1 Thus, to calculate the IRR on the example investment, we'd input all the variables so that the formula looks like this: IRR ...

1. Excel’s IRR function. Excel’s IRR function calculates the internal rate of return for a series of cash flows, assuming equal-size payment periods. Using the example data shown above, the IRR ...

The next step is to use the =IRR() formula in Excel to calculate our internal rate of return. That formula returns 16.2%, which is our internal rate of return for this investment.

The internal rate of return calculation is by definition annual, so we just have to tweak the calculation a bit to account for that. For a monthly payment schedule, use this formula: =(IRR()+1)^12-1.