What must be known to calculate the IRR?

To calculate the Internal Rate of Return (IRR), it is essential to understand the relationship between the initial investment and the expected future cash flows, which are crucial to the calculation. The IRR is the discount rate that sets the net present value (NPV) of these cash flows equal to zero. Therefore, knowing the initial investment allows for a starting point for the calculation, while the net cash flows provide the expected returns over time.

Additionally, the sale price at the end of the investment period can significantly impact the overall return, influencing the IRR. The discount rate is implicitly derived when calculating IRR, so while it is integral to the NPV calculations, it is not explicitly required as it will be determined as part of the IRR calculation process. Lastly, understanding time periods is critical since IRR calculations consider the timing of all cash flows.

In contrast, the other options include elements that may contribute to an understanding of an investment's viability but do not provide the necessary components for calculating IRR. Market conditions, property age, and local market trends may inform strategic decisions but are not required for the IRR calculation itself.