Return Internal Rate (IRR) and NPV

The discount rate for an investment with a net actual

value of zero is called the Internal Return Rate (IRR). In
other words, it is the annual compound profit that an
investor expects to earn over the course of an
investment's lifetime (or to achieve it).

For example, if a series of cash flows is sold with a

$50,000 net present value (NPV) and an investor pays
$50,000 for the security, the investor's net present
value (NPV) is $0. This means that they profit from the
safety discount rate. The investor should pay less than
$50,000 in order to obtain a larger IRR than the
discount rate.

The internal return rate may be calculated in three

ways:
Using the IRR or XIRR functions in Excel or other tablet
apps (see example below)
Using a computer for financial purposes
An iterative process in which the analyst tries various
rate discounts until the net present value (NPV)
reaches zero (Goal Seek in Excel can be used to do this)