Enter cash flow at time (t)

0,-8000 1,3500 2,3500 3,3500  

Enter Discount Rate % (i)

  
      

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Calculate the Internal Rate of Return (IRR) using the cashflows at the time entered using a guess and check method

Try using 1% discounting each cash flow back to time 0

PVt  =	Ct
	(1 + i)t

where C_t is the cash flow at time t and i is the discount rate

Time	Cashflow (Ct)	(1 + i)t	PVt = Ct/(1 + i)t
0	-8,000.00	1.00000	-8,000.00
1	3,500.00	1.01000	3,465.35
2	3,500.00	1.02010	3,431.04
3	3,500.00	1.03030	3,397.07

Determine NPV

NPV = ΣPV_t
NPV = -8,000.00 + 3,465.35 + 3,431.04 + 3,397.07
NPV = 2,293.46

Try using 2% discounting each cash flow back to time 0

PVt  =	Ct
	(1 + i)t

where C_t is the cash flow at time t and i is the discount rate

Time	Cashflow (Ct)	(1 + i)t	PVt = Ct/(1 + i)t
0	-8,000.00	1.00000	-8,000.00
1	3,500.00	1.02000	3,431.37
2	3,500.00	1.04040	3,364.09
3	3,500.00	1.06121	3,298.12

Determine NPV

NPV = ΣPV_t
NPV = -8,000.00 + 3,431.37 + 3,364.09 + 3,298.12
NPV = 2,093.58

Try using 3% discounting each cash flow back to time 0

PVt  =	Ct
	(1 + i)t

where C_t is the cash flow at time t and i is the discount rate

Time	Cashflow (Ct)	(1 + i)t	PVt = Ct/(1 + i)t
0	-8,000.00	1.00000	-8,000.00
1	3,500.00	1.03000	3,398.06
2	3,500.00	1.06090	3,299.09
3	3,500.00	1.09273	3,202.99

Determine NPV

NPV = ΣPV_t
NPV = -8,000.00 + 3,398.06 + 3,299.09 + 3,202.99
NPV = 1,900.14

Try using 4% discounting each cash flow back to time 0

PVt  =	Ct
	(1 + i)t

where C_t is the cash flow at time t and i is the discount rate

Time	Cashflow (Ct)	(1 + i)t	PVt = Ct/(1 + i)t
0	-8,000.00	1.00000	-8,000.00
1	3,500.00	1.04000	3,365.38
2	3,500.00	1.08160	3,235.95
3	3,500.00	1.12486	3,111.50

Determine NPV

NPV = ΣPV_t
NPV = -8,000.00 + 3,365.38 + 3,235.95 + 3,111.50
NPV = 1,712.83

Try using 5% discounting each cash flow back to time 0

PVt  =	Ct
	(1 + i)t

where C_t is the cash flow at time t and i is the discount rate

Time	Cashflow (Ct)	(1 + i)t	PVt = Ct/(1 + i)t
0	-8,000.00	1.00000	-8,000.00
1	3,500.00	1.05000	3,333.33
2	3,500.00	1.10250	3,174.60
3	3,500.00	1.15763	3,023.42

Determine NPV

NPV = ΣPV_t
NPV = -8,000.00 + 3,333.33 + 3,174.60 + 3,023.42
NPV = 1,531.35

Try using 6% discounting each cash flow back to time 0

PVt  =	Ct
	(1 + i)t

where C_t is the cash flow at time t and i is the discount rate

Time	Cashflow (Ct)	(1 + i)t	PVt = Ct/(1 + i)t
0	-8,000.00	1.00000	-8,000.00
1	3,500.00	1.06000	3,301.89
2	3,500.00	1.12360	3,114.99
3	3,500.00	1.19102	2,938.66

Determine NPV

NPV = ΣPV_t
NPV = -8,000.00 + 3,301.89 + 3,114.99 + 2,938.66
NPV = 1,355.54

Try using 7% discounting each cash flow back to time 0

PVt  =	Ct
	(1 + i)t

where C_t is the cash flow at time t and i is the discount rate

Time	Cashflow (Ct)	(1 + i)t	PVt = Ct/(1 + i)t
0	-8,000.00	1.00000	-8,000.00
1	3,500.00	1.07000	3,271.03
2	3,500.00	1.14490	3,057.04
3	3,500.00	1.22504	2,857.05

Determine NPV

NPV = ΣPV_t
NPV = -8,000.00 + 3,271.03 + 3,057.04 + 2,857.05
NPV = 1,185.12

Try using 8% discounting each cash flow back to time 0

PVt  =	Ct
	(1 + i)t

where C_t is the cash flow at time t and i is the discount rate

Time	Cashflow (Ct)	(1 + i)t	PVt = Ct/(1 + i)t
0	-8,000.00	1.00000	-8,000.00
1	3,500.00	1.08000	3,240.74
2	3,500.00	1.16640	3,000.69
3	3,500.00	1.25971	2,778.42

Determine NPV

NPV = ΣPV_t
NPV = -8,000.00 + 3,240.74 + 3,000.69 + 2,778.42
NPV = 1,019.85

Try using 9% discounting each cash flow back to time 0

PVt  =	Ct
	(1 + i)t

where C_t is the cash flow at time t and i is the discount rate

Time	Cashflow (Ct)	(1 + i)t	PVt = Ct/(1 + i)t
0	-8,000.00	1.00000	-8,000.00
1	3,500.00	1.09000	3,211.01
2	3,500.00	1.18810	2,945.88
3	3,500.00	1.29503	2,702.64

Determine NPV

NPV = ΣPV_t
NPV = -8,000.00 + 3,211.01 + 2,945.88 + 2,702.64
NPV = 859.53

Try using 10% discounting each cash flow back to time 0

PVt  =	Ct
	(1 + i)t

where C_t is the cash flow at time t and i is the discount rate

Time	Cashflow (Ct)	(1 + i)t	PVt = Ct/(1 + i)t
0	-8,000.00	1.00000	-8,000.00
1	3,500.00	1.10000	3,181.82
2	3,500.00	1.21000	2,892.56
3	3,500.00	1.33100	2,629.60

Determine NPV

NPV = ΣPV_t
NPV = -8,000.00 + 3,181.82 + 2,892.56 + 2,629.60
NPV = 703.98

Try using 11% discounting each cash flow back to time 0

PVt  =	Ct
	(1 + i)t

where C_t is the cash flow at time t and i is the discount rate

Time	Cashflow (Ct)	(1 + i)t	PVt = Ct/(1 + i)t
0	-8,000.00	1.00000	-8,000.00
1	3,500.00	1.11000	3,153.15
2	3,500.00	1.23210	2,840.68
3	3,500.00	1.36763	2,559.17

Determine NPV

NPV = ΣPV_t
NPV = -8,000.00 + 3,153.15 + 2,840.68 + 2,559.17
NPV = 553.00

Try using 12% discounting each cash flow back to time 0

PVt  =	Ct
	(1 + i)t

where C_t is the cash flow at time t and i is the discount rate

Time	Cashflow (Ct)	(1 + i)t	PVt = Ct/(1 + i)t
0	-8,000.00	1.00000	-8,000.00
1	3,500.00	1.12000	3,125.00
2	3,500.00	1.25440	2,790.18
3	3,500.00	1.40493	2,491.23

Determine NPV

NPV = ΣPV_t
NPV = -8,000.00 + 3,125.00 + 2,790.18 + 2,491.23
NPV = 406.41

Try using 13% discounting each cash flow back to time 0

PVt  =	Ct
	(1 + i)t

where C_t is the cash flow at time t and i is the discount rate

Time	Cashflow (Ct)	(1 + i)t	PVt = Ct/(1 + i)t
0	-8,000.00	1.00000	-8,000.00
1	3,500.00	1.13000	3,097.35
2	3,500.00	1.27690	2,741.01
3	3,500.00	1.44290	2,425.67

Determine NPV

NPV = ΣPV_t
NPV = -8,000.00 + 3,097.35 + 2,741.01 + 2,425.67
NPV = 264.03

Try using 14% discounting each cash flow back to time 0

PVt  =	Ct
	(1 + i)t

where C_t is the cash flow at time t and i is the discount rate

Time	Cashflow (Ct)	(1 + i)t	PVt = Ct/(1 + i)t
0	-8,000.00	1.00000	-8,000.00
1	3,500.00	1.14000	3,070.18
2	3,500.00	1.29960	2,693.14
3	3,500.00	1.48154	2,362.41

Determine NPV

NPV = ΣPV_t
NPV = -8,000.00 + 3,070.18 + 2,693.14 + 2,362.41
NPV = 125.73

Try using 15% discounting each cash flow back to time 0

PVt  =	Ct
	(1 + i)t

where C_t is the cash flow at time t and i is the discount rate

Time	Cashflow (Ct)	(1 + i)t	PVt = Ct/(1 + i)t
0	-8,000.00	1.00000	-8,000.00
1	3,500.00	1.15000	3,043.48
2	3,500.00	1.32250	2,646.50
3	3,500.00	1.52088	2,301.30

Determine NPV

NPV = ΣPV_t
NPV = -8,000.00 + 3,043.48 + 2,646.50 + 2,301.30
NPV = -8.72

Since our 15% IRR resulted in a negative NPV, we use the last interest rate that resulted in a positive NPV which was 14%