Which of the following is needed to calculate the internal rate of return (IRR)?

To calculate the internal rate of return (IRR), it is essential to have the initial investment amount. The IRR is the discount rate that makes the net present value (NPV) of all cash flows from an investment equal to zero. To determine this rate, one must consider the timeline and magnitude of cash inflows and outflows, starting with the initial investment as a cash outflow.

In this context, the initial investment amount is crucial because it represents the capital put into the investment upfront. Subsequent cash flows, such as rental income or potential sale proceeds, are compared against this initial outflow to evaluate the project's profitability over time. Without knowing the amount invested initially, it would be impossible to calculate the IRR, as the metric relies on assessing returns relative to that initial commitment.

While other factors, such as annual rental income and total expenses, are important for assessing the overall performance of an investment, they are not the primary data point needed to compute the IRR itself. Therefore, understanding the initial investment is vital in accurately determining the IRR and making financial decisions based on that analysis.