Internal rate of return
Find the yearly return that makes a set of cash flows break even in present value.
The IRR is the discount rate at which the NPV is exactly zero. It is a single percentage you can compare against other investments or a loan rate.
We use the same flows as the NPV guide: -10,000 now, then 3,000, 4,200 and 6,800.
Classic Financial II
Start on the main screen: Press 2ND then CPT (QUIT) to leave a worksheet and return to the plain calculator. ON/OFF also drops back to the standard screen and clears an error.
Enter the cash flows in the CF worksheet.
CF10000+/-ENTER↓3000ENTER↓↓4200ENTER↓↓6800ENTERPress IRR, then CPT.
IRRCPT
You should seeIRR= 16.34
RPN Financial 12
Start on the main screen: There is no menu to leave: the display always shows the X register. Press f then R/S (P/R) to leave program mode, and clear a pending prefix by pressing ON.
Store the flows: CF0 with g, PV and each later flow with g, PMT.
10000CHSgCF₀PV3000gCFjPMT4200gCFjPMT6800gCFjPMTPress f, then FV (IRR). It takes a moment to search.
fIRRFV
You should see16.34
Tips
- IRR needs at least one negative and one positive flow. All the same sign gives an error.