Based on your last post I'm guessing that your company requires you to
determine a four-year IRR for a project of this sort and it requires (or at
least seeks) a 4-year IRR that exceeds your company's cost of capital. A
requirement like this makes sense when you are investing money and hoping
that you don't have to wait 5 years or more for the stream of subsequent
inflows to make the investment worthwhile.
However, your situation is akin to that of a borrower who borrows $1500 and
only needs to make four annual payments of $250 each. In effect, you're
borrowing at a negative 14% interest rate. I suspect that you are probably
struggling with the fact that you appear to have an unfathomably attractive
situation.
If we continue to approach this scenario as if you are borrowing $1500, and
if your IRR is essentially your interest rate, your objective SHOULD BE a low
IRR. In fact, any IRR that is lower than your cost of capital should be
attractive to you.
Now the catch. As I said before, companies often want an attractively high
milestone IRR (in your case a 4-year IRR) because they want to make sure the
payoff isn't too far off into the future. Your issue isn't when you will get
the payoff because you're getting the cash inflow up front. As a result, a
4-year IRR may not be nearly as relevant for you. What you may need to be
more cautious about is the liability beyond Year 4. If your incremental cash
outflows will continue at a rate of $250 per year for an extended period of
time you may likely encounter a point in time when the calculated IRR will be
HIGHER than your company's cost of capital. A milestone IRR at 10 years may
indicate that selling your inventory and outsourcing is not such a good idea
(financially).
In closing, the NEGATIVE IRR already shows you the benefit of receiving the
inflow but ONLY because your initial cashflow is an INFLOW, and perhaps
because you are using an investor's convention (the 4-year milestone IRR) to
evaluate a borrower's opportunity. There is no way I know of to flip the IRR
to make this look attractive. If, however, you flip your point of view from
that of an investor to one of a borrower you may find the negative IRR a more
valuable metric.
I hope that helps.