When the net cash inflow is the same every year for a project after the initial investment, the internal rate of return of a project can be determined by dividing the initial investment required in the project by the annual net cash inflow.This computation yields a factor that can be looked up in a table of present values of annuities to find the internal rate of return.

Internal Rate

Internal Rate, often referred to as Internal Rate of Return (IRR), is the discount rate that makes the net present value (NPV) of all cash flows from a particular project zero.

Initial Investment

The amount of money spent to start a project, purchase assets, or acquire a business.

Net Cash Inflow

The amount of cash that a company generates from its operational, investment, and financing activities, after accounting for cash outflows.