IRR formula

From google answers, I got the following formula:

0 = -1000 + 10/(1+i) + 10/(1+i)^2 + ... + 10/(1+i)^11 + 1010/(1+i)^12

So $1000 invested at time zero (which will be a negative amount) will exactly offset the streams of income (which will be positive) that you get in future years when you have guessed the correct IRR. Remember that you have to include the principal being returned in the last year.

Below is the calculation for $1000 invested for three years with the principal coming back at the end of the 3 years.

0 = -1000 + 10/(1+.01) + 10/(1+.01)^2 + 1010/(1+.01)^3
0 = -1000 + 9.9 + 9.80 + 980.30
0 = -1000 + 1000

1% makes the equation balance, so 1% is the IRR of this investment.