In this video, I break down the internal rate of return (IRR), one of the core tools investors and analysts use to evaluate investments and compare projects. You’ll learn exactly what IRR means, why it represents the discount rate that makes NPV equal to zero, and how it links your initial investment to the present value of future cash flows. I walk through the IRR formula step by step, explain what each variable means, and show you a complete worked example with real numbers. I also cover how to interpret your IRR result by comparing it to your required return, and where IRR is commonly used in corporate finance, real estate, and private markets. Plus, I explain the key limitations every investor should understand, including the reinvestment rate assumption, scale blindness, and the multiple IRR problem. Whether you’re evaluating a capital budgeting decision or analyzing a real estate deal, this video gives you everything you need to calculate and interpret IRR with confidence.
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Chapters
0:00 – Introduction
0:25 – What is IRR?
1:05 – The IRR Formula
2:20 – Worked Example
3:19 – How to Interpret IRR
3:55 – Real-World Applications
4:19 – Key Limitations
5:00 – Key Takeaways
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*Disclosure: This is not financial advice and should not be taken as such. The information contained in this video is an opinion. Some of the information could be wrong. This channel is owned and operated by Portfolio Constructs LLC. Some of the links above are affiliate links, meaning, at no additional cost to you, I will earn a commission if you click through and make a purchase.
