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  • 6 Internal Rate of Return IRR

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    The internal rate of return (IRR) is the discount rate that sets the net present value of an investment's cash flows to zero. It is used to estimate the profitability of potential investments. This document provides an example calculation of IRR using cash flow data over four periods, with an initial investment of $130 and subsequent positive cash flows, resulting in an IRR of 19.4%.

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    The internal rate of return (IRR) is the discount rate that sets the net present value of an investment's cash flows to zero. It is used to estimate the profitability of potential investments. This document provides an example calculation of IRR using cash flow data over four periods, with an initial investment of $130 and subsequent positive cash flows, resulting in an IRR of 19.4%.

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    4 views5 pages

    6 Internal Rate of Return IRR

    Uploaded by

    Тик Токер
    The internal rate of return (IRR) is the discount rate that sets the net present value of an investment's cash flows to zero. It is used to estimate the profitability of potential investments. This document provides an example calculation of IRR using cash flow data over four periods, with an initial investment of $130 and subsequent positive cash flows, resulting in an IRR of 19.4%.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
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    Internal Rate of Return (IRR)

    Description

    The internal rate of return (IRR), also known as the discounted cash flow
    rate of return, is the discount rate that makes net present value equal to
    zero. It is used to estimate the profitability of a potential investment.

    This Excel model is for educational purposes only. Strictly Confidential


    All content is Copyright material of 365 Financial Analyst ®

    © 2023, 365 Financial Analyst ®


    Internal Rate of Return (IRR)
    Input Data

    Timeline
    Period 0 1 2 3
    Cash Flows ($130.00) $70.00 $60.00 $50.00

    Output

    Internal Rate of Return (IRR) 19.4% =IRR(C8:F8)


    Internal Rate of Return (IRR)
    Input Data

    Timeline
    Period 1/1/2022 1/1/2023 1/1/2024 1/1/2025
    Cash Flows ($130.00) $70.00 $60.00 $50.00

    Output

    Internal Rate of Return (IRR) 19.4% =XIRR(C8:F8,C7:F7)

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