The Internal Rate of Return cannot be solved by rearranging the formula and solving for IRR, but instead must be determined through trial and error. This process starts with a guess and eventually converges on the IRR that results in a difference of zero between the present value and future value.
The formula for the present value is:
MVE
The formula for the future value is:
MVB x (1 + IRR) + CF1 x (1 + IRR) W1 … + CFn x (1+ IRR) Wn
As you can see, the present value equals the future value only when the correct IRR is entered.
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