| Year | Cash Flow | Cumulative |
|---|---|---|
| 0 | -$100,000 | -$100,000 |
| 1 | $25,000 | -$75,000 |
| 2 | $30,000 | -$45,000 |
| 3 | $35,000 | -$10,000 |
| 4 | $30,000 | $20,000 |
| 5 | $25,000 | $45,000 |
IRR is the discount rate that makes NPV = 0. It represents the annualized return of an investment.
If IRR > hurdle rate → accept. If IRR < hurdle rate → reject.