Internal rate of return (IRR) is a metric of profitability for potential investments. Internal rate of return is a discount rate that sets the net present value (NPV) of all future cash flows the investment equal to zero. An approximate solution is found using numerical iteration.
IRR(Node [, Guess])
We have project with following cash-flows.
Our goal is to find a discount rate with which the discounted cash flows sum-up to zero:
The IRR function tells us the rate is 12%. The result for Cash Flows up to year 2020 is not interesting for us and can be filtered out with FILTER function.