List all cash flows for the investment, including the initial outflow and all future inflows/outflows
Set the net present value equation equal to zero
Use the formula: 0 = Σ [Cash Flow at time t / (1 + IRR)^t]
Solve for the discount rate that makes the equation equal zero
Use a financial calculator, spreadsheet, or IRR function to compute the rate
In Excel or Google Sheets, use =IRR(range_of_cash_flows)
If cash flows occur at irregular times, use =XIRR(range_of_cash_flows, range_of_dates)
Check the result against the project’s required return or hurdle rate