How do you calculate IRR on a calculator?

How to Calculate IRR on a Calculator

The internal rate of return (IRR) is a metric used to evaluate the profitability of an investment or project. It is the annualized rate of return that makes the net present value (NPV) of all cash flows from the investment equal to zero. A higher IRR indicates a more profitable investment.

Key Facts

  1. Enter the cash flows: Enter the cash flows of the investment or project into the calculator. The cash flows should include both positive and negative values representing the inflows and outflows of cash over time.
  2. Set the frequency: Set the frequency of the cash flows. This is important if the cash flows occur at irregular intervals. Most calculators have an option to set the frequency.
  3. Use the IRR function: Once you have entered the cash flows and set the frequency, use the IRR function on your calculator. The IRR function is usually denoted by “IRR” or a similar abbreviation.
  4. Calculate the IRR: Press the calculate button or the equivalent on your calculator to calculate the IRR. The calculator will display the IRR as a percentage.

It’s important to note that the specific steps may vary depending on the type and model of calculator you are using. Refer to the user manual or guide for your calculator for more detailed instructions.

Steps to Calculate IRR on a Calculator

  1. Enter the Cash Flows

    Enter the cash flows of the investment or project into the calculator. The cash flows should include both positive and negative values representing the inflows and outflows of cash over time.

FAQs

  1. What is the formula for calculating IRR on a calculator?

    The formula for calculating IRR on a calculator is typically not displayed explicitly. Instead, calculators use built-in functions or algorithms to compute the IRR based on the entered cash flows.

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