How to use it
- Use the formula below with your own figures.
The formula
IRR is the rate where NPV equals zero.
Worked example
Compare IRR with your required return to decide.
Frequently asked questions
IRR vs NPV?
IRR is a rate; NPV is a value.
Higher IRR better?
Usually, but check the assumptions.
Tips
- Know your break-even before scaling spend.
- Separate margin from markup when pricing.
- Discount future cash flows to value projects.
Key terms
- Break-even
- Where revenue covers costs.
- Margin
- Profit as a percent of price.
- NPV
- Discounted value of future cash flows.