Internal Rate of Return Explained for Business Professionals
What is the Internal Rate of Return (IRR) and how do you use it to evaluate projects and investments?
In this video, we explain IRR in clear, practical terms — including its relationship with Net Present Value (NPV), how to calculate it using a trial-and-error approach, and how organisations use it to compare projects and simulate Return on Investment (ROI). We walk through a complete multi-year cash flow scenario step by step, showing exactly how to find the discount rate at which NPV equals zero — and what that figure means for your investment decision. We also cover the limitations of IRR, including what happens with non-conventional cash flows and why IRR alone can sometimes give a misleading picture.
What you'll learn:
What Internal Rate of Return (IRR) is and how it works
How IRR relates to Net Present Value (NPV)
How to calculate IRR using the trial-and-error method
How to use IRR to compare projects and assess ROI
The limitations of IRR and when to use it alongside other techniques
This video is ideal for business analysts, project professionals, and anyone involved in business case development or investment appraisal.
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Related topics: internal rate of return, IRR explained, IRR vs NPV, irr calculation, investment appraisal, net present value, NPV, discounted cash flow, business case, business finance, return on investment
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