Discount rate at which an investment's NPV equals zero.
Discount rate at which NPV of an investment equals zero.
Formula
Solve for r where: sum(Cash Flow / (1+r)^t) = Initial Investment
12.04%
Assumes equal annual cash flows. For irregular flows, use Excel's IRR function.
Cash flows: -12,000 then 5,000 for 3 years -> IRR ~ 12.0%
