Doing this for both projects, we calculate that the facility expansion would have an internal rate of return of 14.5%, versus 26.5% for the new equipment option.

Internal rate of return (IRR) is one of several well-known formulas used to evaluate prospective investments, especially ones that generate cash flows, like in real estate.

Using Excel to calculate IRR with unequal timing of cash flows In the chart below, we have management's estimation for the initial cost and cash flow returns for both the expansion and new ...