TL;DR
- IRR is the rate where NPV = 0 — compare it to your financing cost.
- It makes differently sized investments comparable in one percentage.
- It says nothing about absolute value; a 40% IRR on €8,000 is small money.
Comparing a €12,000 pretreatment unit with a €140,000 press is impossible with absolute figures. IRR normalises them — as long as you also check the euro amount behind the percentage.
0 = −Investment + Σ (CF_m / (1 + IRR)^m)
- Solved numerically; there is no closed form
€60,000 investment, €2,400/month, 36 months
- Monthly IRR
- ≈ 2.1%
- Annualised IRR
- ≈ 28%
- Financing cost
- 7.5% — the project clears the hurdle comfortably
Interactive example
Investment, monthly benefit — payback, ROI and NPV
- Payback
- 11.8 months
- ROI over 36 months
- 206 %
- NPV
- € 171.250
Same calculation kernel as the full calculators. For a decision-grade result, open the matching calculator.
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