# IRR
URL: https://docs.valsight.ai/irr/
Description: Internal rate of return (IRR) is a metric of profitability for potential investments. It is the discount rate that sets the net present value of all future cash flows of the investment equal to zero, found using numerical iteration.
**Category:** [Finance functions](/finance-functions/)

## Overview

The **IRR** function **calculates the internal rate of return** ([IRR](https://en.wikipedia.org/wiki/Internal_rate_of_return)), a metric of profitability for potential investments. Internal rate of return is a discount rate that sets the net present value ([NPV](https://en.wikipedia.org/wiki/Net_present_value)) of all future cash flows of the investment equal to zero. An approximate solution is found using numerical iteration.

Use this function when you need to find the discount rate at which an investment's cash flows break even (NPV = 0).

## Syntax

`IRR('Node' [, Guess])`

## Parameters

| Parameter | Description                                                                                   | Type           | Required | Default |
| --------- | --------------------------------------------------------------------------------------------- | -------------- | -------- | ------- |
| **Node**  | Yearly cash flows. At least one of the cash flows must be negative and at least one positive. | Node reference | Yes      | --      |
| **Guess** | A first guess at the rate.                                                                    | Number         | No       | `10%`   |

## Example

### IRR of a project with mixed cash flows

This example calculates the internal rate of return for a project with an initial investment and subsequent positive cash flows.

**Input node:** `'CF'`

| Year | Value  |
| ---- | ------ |
| 2025 | -10000 |
| 2026 | 1155   |
| 2027 | 5000   |
| 2028 | 7000   |

Our goal is to find a discount rate with which the discounted cash flows sum up to zero:

![image2018-7-24\_10-39-30.png](./images/5094190292.png)

**Formula:** `IRR('CF')`

| Year | IRR Result |
| ---- | ---------- |
| 2027 | -23%       |
| 2028 | 12%        |

The IRR function tells us the rate is 12%. The result for cash flows up to year 2027 is not interesting for us and can be filtered out with the [FILTER](/filter/) function.

## Related Functions

| Function       | When to use instead                                                                            |
| -------------- | ---------------------------------------------------------------------------------------------- |
| [NPV](/npv/)   | When you need the net present value at a known discount rate rather than solving for the rate. |
| [CAGR](/cagr/) | When you need compound growth over N periods rather than the break-even discount rate.         |