Internal rate of return irr, finance, Other Engineering

Internal rate of return IRR
In case of IRR method cash flow are analyzed taking into account the magnitude and the timing. IRR is that discount rate which gives a net present value equal to zero. The IRR method will also give the same decision as the NPV method in case of non-mutually exclusive projects. In case of independent projects one with highest IRR will be accepted (Robert Parrino & David s. Kidwell, 2009).

Where r= Internal Rate of Return
K=opportunity cost of capital.
Merits of IRR:
• Like NPV method, IRR methods also consider time value of money.
• All cash flow are taken to calculate rate of return
• Shareholders wealth maximinsation objectives given importance.
Demerits of IRR:
• Given misleading and inconsistent result when the NPV does not decline with the discount rate.
• Difficulty in making decision when mutually exclusive project exists
• IRR method fails to give an actual exists annual profitability of an investment.
• IRR method makes in realistic assumption that interim positive cash flow are reinvested at the same rate of return.
• More than one IRR exists for projects with alternative cash flow this leads to confusion and ambiguity (I.M. Pandey, 2005).
Posted Date: 2/6/2012 10:34:36 PM | Location : United States

Related Discussions:- Internal rate of return irr, finance, Assignment Help, Ask Question on Internal rate of return irr, finance, Get Answer, Expert's Help, Internal rate of return irr, finance Discussions

Write discussion on Internal rate of return irr, finance
Your posts are moderated
Related Questions
Q. Explain the Chaplets.                                                       OR  When are chaplets required in moulding practice? What is the material of the chaplets?

Q.  Describe the structure of grain boundary. Ans. One phase of metal contains many grains of various orientation, the individual crystals are called grains. Thus a grain is

Artificial Intelligence Artificial Intelligence is a typical science to describe, because it has fuzzy borders with, psychology, computer science, mathematics, philosophy, stat

Diffuser action: The flare, which increases the area of the duct, is known as a diffuser and its shape determines the rate of compression and the amount by which the air is com

two frames are not joint properly so create gap between two frames so material lick from this gap

I need help in doing a project in excel that has everything about drilling like mud pump etc ..

Q. What is a normal spectrum? Show that grating spectrum is a normal spectrum. Ans. Normal spectrum and the dispersive power of grating is defined as the rate of change of a brings you unique solution in electrical engineering Class A Amplifier Operation Class A amplifiers are biased so that variations in input signal polarit

Double acting feathering system: To prevent excessive drag in the event of a propeller on engine failure, the double acting propeller as with the single acting propeller requir