IRR: drag the annual receipt
Drag the annual receipt. The outlay stays still, so IRR moves only because the inflows do. A fatter receipt is a higher rate on the same money tied up. It is a rate, not an amount.
IRR
15.24%
Annual receipt
$3,000.00
The outlay stays at $10,000.00. A fatter receipt is a higher rate on the same money tied up. Illustrative arithmetic, not a project decision or advice.
Outlay
$10,000.00 at time zero, held still.
In short
- Drag the bar right for a larger yearly receipt and a higher IRR.
- Drag it left for a thinner receipt and a lower rate.
- Watch the rate, not a pile of cash: scale the whole series and IRR would not move.
- Focus the handle and use the arrow keys to step the receipt.
The rate that sets NPV to zero
How money-weighted return works is IRR as a personal rate of return. How NPV and IRR work is the project version. The IRR calculator searches for the root.
A rate is silent on size
Scale every cash flow and IRR does not move. NPV against IRR is why ranking is an NPV question. Money-weighted against time-weighted is the other split.
One sign change
A conventional cash flow series has one IRR. Several sign changes can have several roots, or none.
Common questions
Why is there no closed form?
A five-year series is a degree-5 polynomial. Searching is how every IRR you have seen was found.
Is a higher IRR a better project?
It is more headroom against a hurdle. It is not more money if the outlay is small.
Is this a buy?
No. It is a root on a teaching sheet. It is educational material, not advice.
Keep reading
This page is educational material, not financial advice. The figures come from the formula shown and assume the inputs you enter hold for the whole term. Your own rate, fees, taxes and timing will differ, so treat the output as arithmetic to check a decision against, not as a recommendation.