IRR the calculation by hand Investment proposal is to buy a machine for 80,000. This will save 20,000 annually for 5 years and will have a resale value of 10,000 at the end of year 5 To calculate the IRR a 'trial and error' approach is adopted. Assume Cost of Capital is 9%. Calculate NPV at existing Cost of Capital % - it should be positive Select a higher Cost of Capital % and calculate NPV Keep doing so until you arrive a negative NPV Then apply an interpolation calculation to find the % at which the NPV is zero