IRR

In this lesson

1. 0:00 Internal rate of return and modified IRR overview
2. 0:34 What is internal rate of return
3. 2:05 How to calculate IRR step by step
4. 3:13 Using the IRR spreadsheet formula
5. 4:38 Worked example calculating IRR
6. 6:49 Benefits and limitations of IRR

About this lesson

You'll discover why IRR matters for decision-making, how to use the spreadsheet formula in your exam software, and when to accept or reject a project based on whether IRR exceeds your discount rate. The session also introduces Modified Internal Rate of Return (MIRR), which overcomes some of IRR's limitations, particularly when projects have unconventional cash flows or multiple IRRs that could confuse your investment decisions. This content is essential for ACCA and CIMA students studying Financial Management, Advanced Financial Management, or Strategic Business Leader modules, where investment appraisal is a core skill. You'll work through a practical example of calculating IRR for a six-year project, learn the formula-based approach and the faster spreadsheet method, and understand the benefits and limitations of this technique — including why IRR isn't always what it seems and how reinvestment assumptions can affect your analysis. By mastering IRR and MIRR, you'll be able to evaluate capital projects with confidence and apply these tools to real exam scenarios.

Duration: 8m