Internal Rate of Return (IRR) Explained with Example

[@alexdunae]

Thanks for a super clear explanation. Much appreciated!

[@cmathias4993]

How did you get a Negative NPV when using 12% as the Rate of Return? It should be positive since the IRR is Higher than 12%

[@epm8805]

You can work through the example yourself and see the example is correct. Basically, if your rate of return guess is too high, then you'll get a positive NPV and you need to reduce your rate of return guess. Conversely, if your rate of return guess is too low, NPV will be negative, and you need to increase your guess.

[@javiergaitan]

I was confused by this as well. There is an error in the NPV calculation when using the 14% rate. It should be 236.10 (positive) and not negative. Also, when using a 12% rate, the NPV should add up to -56.42.