Businesses use internal rate of return (IRR) to calculate potential return rates for projects and thus compare two or more projects. If you have a Hewlett-Packard (HP) 12c financial calculator, you can calculate IRR using the "IRR" button. To calculate IRR, you must know initial investment, any additional cash flows, the frequencies of any future cash flows and your expected return cash flow.
Type your initial investment into the calculator.
Press "g" and then "CFo" to record the initial cash flow.
Enter your first cash flow. Press "g" and then "CFi" to record your first cash flow.
Repeat Step 3 for each cash flow.
Type the number of times the cash flow occurs, then press "g" followed by "N."
Repeat Steps 4 and 5 for any additional cash flows.
Type your final cash flow amount, followed by "g" and then "CFi."
Type the interest rate as a percentage — not a decimal — and press "i."
Press "f" and then "IRR" to calculate IRR.
Carter McBride started writing in 2007 with CMBA's IP section. He has written for Bureau of National Affairs, Inc and various websites. He received a CALI Award for The Actual Impact of MasterCard's Initial Public Offering in 2008. McBride is an attorney with a Juris Doctor from Case Western Reserve University and a Master of Science in accounting from the University of Connecticut.