Irr or internal rate of return, Finance Basics

IRR or Internal Rate of Return

This method is a discounted cash flow technique that uses the principle of NPV.  It is described as the rate such equates the present value of cash outflows of an investment to the initial capital.

IRR = Pv (cash inflows)

     = Pv(cash outflows) or

IRR is the cost of capital when as NPV = 0.

It is also identified internal rate of return since it depends completely on the outlay of investment and proceeds associated along with the project and not a rate determined outside the venture.

IRR = C = A1 / (1+r)1 + A2/(1+r)2 + A3 / (1+r)3 + ... AN / (1+r)N

A = inflow for each period

C = Cost of investment

The value r can be found via:

i) Trial and error

ii) Via interpolation

iii) Via extrapolation

Posted Date: 1/31/2013 12:58:01 AM | Location : United States







Related Discussions:- Irr or internal rate of return, Assignment Help, Ask Question on Irr or internal rate of return, Get Answer, Expert's Help, Irr or internal rate of return Discussions

Write discussion on Irr or internal rate of return
Your posts are moderated
Related Questions
The price of bread is $0.50 per pound, and the price of butter is $0.25 per ounce. Channing spends all of her income, buying 12 pounds of bread, 7 ounces of butter, and nothing els

In mergers, acquisitions, or other relationships between hospitals and physician groups, what are the benefits to each party from entering into an arrangement with the other? What

what makes a preference shares a hybrid?

Petroleo Brasileiro (PBR) has just issued 1M one year bonds. Each bond hasa face value of1,000 Reais. Owners of the bonds are entitled to receive $R 1000 back at the end of the yea

I need a report on Specific Cost. Can you please assist me for Specific Cost report for about 2500 words?

on this sentence: "all have an interest in understanding what drives trade" please explain what''s meaning of "what drives trade"?


What are the factors that affect the interest rate and how?

Classification of Preference Share Capital i) Redeemable Class Redeemable preferential shares are bought back via Issue Company after minimum redemption duration however

On 1 January 2008, a young artist called Michelangelo signed a contract with a charity named Art Angels, which supports young artists to do large projects. The agreement requires M