Irr or internal rate of return, Finance Basics

Assignment Help:

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


Related Discussions:- Irr or internal rate of return

Drawback of stock repurchases, Drawback of Stock Repurchases 1. High ...

Drawback of Stock Repurchases 1. High price A company may find it not easy to repurchase shares at their recent value and price paid may be higher to the detriment of rem

Describe the transaction structure-financing, Description of the deal, anal...

Description of the deal, analysis of abnormal returns & premium (a)  Describe the transaction structure, mode of payment, and financing.  (b) Give your comment/assessment of

Source of finance for the sole proprietor, Source of Finance for the Sole P...

Source of Finance for the Sole Proprietor Some sources of capital---Discuss a) Savings b) Assistance from friends or relatives c) Proceeds from sale of assets d) Ba

Investment bank, Investment Bank A lending entity is engaged in all the...

Investment Bank A lending entity is engaged in all the phases of privacy offerings the including managing, underwriting, trading, and the distributing new security issues.

Discuss potential problems of internal finance, Internal finance can avoid ...

Internal finance can avoid the agency costs of debt and equity finance. In practice it is the most important source of funding.   (a)  Discuss potential problems of internal finan

Classification of preference share capital, Classification of Preference Sh...

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

How are financial trades made on an organized exchange, How are financial t...

How are financial trades made on an organized exchange? Ans: Each exchange-listed security is traded at a fixed location on the trading floor known as the post. The trading is

Benefits ordinary share capital - financing, Benefits Ordinary Share Capita...

Benefits Ordinary Share Capital - Financing Benefits of using ordinary share capital in the financing They facilitate projects particularly long-term projects since they

Advantages of overdraft finance, Advantages of Overdraft Finance ...

Advantages of Overdraft Finance 1. It is useful in financial crisis such an accountant cannot forecast because of abrupt fall in profits so liquidity problems. 2. In

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd