Internal Rate of Return Simplified

Since we published Internal Rate of Return content in Accounting Education we've gotten a bunch of feedback, most of which was overwhelmingly positive. Today, we're happy to write even more simplified to Internal rate of return that we've implemented as a direct result of your feedback. We've also written "IRR wikipedia" to better reflect all of the IRR and its comparison  with NPV provided by Wikipedia content. As requested by many of you, we've also written  "MIRR" and Advantages and Disadvantages of IRR for clearing everything about IRR. Today we will provide you 5 tips which will make Internal rate of return simplified.

Tip No. 1 #

Remember Internal rate of return is nothing but high rate of return than normal rate of return.

Tip No. 2 #

There are three situation in which internal rate of return is calculated.

First situation )

When we will earn equal profit on our investment.

( Second situation )

When we will not earn equal profit on our investment but after hit and trial, we will find the rate where our present value of profit will equal to the cost of investment.

( Third situation )

When we will not earn equal profit on our investment but after hit and trial, we will not  find the rate where our present value of profit will equal to the cost of investment.

Tip No. 3 #

We can say simply that calculating of Internal rate of return is just playing the game of Hide and Seek in which actual internal rate is hidden and you have to seek it.  Because, this method of capital budget gives us freedom to assume any rate as internal rate of return. We can assume simply 10%, 11%, 12%, 13% and more but in these assume or estimated rates, real value of IRR will be that which clear condition of following

Every estimated rate may be internal rate of return, if we calculate present value cash inflows and cash outflow with this rate and both will be equal with each other.
 Tip No. 4 #

Present value of cash inflow is following

Net profit of specific period on investment X present value factor which is calculated on the basis of estimated IRR

Present Value of cash outflow is following

Cost of investment X present value factor which is calculated on the basis of estimated IRR.

 Tip No. 5 #


Under stand the formula of IRR

IRR =

lower rate + NPV at lower rate / cash inflows at lower rate - cash inflows at higher rate X ( higher rate - lower rate )

Meaning





Simple Example of IRR Problem and Solution  


COMMENTS

Comments on this Website
.
Share above Content to Your Friends



Name

access account accountant Accounting accounting definitions accounting ebook Accounting education accounting procedure accounting process outsourcing Accounting Software advance advertising africa Amalgamation amendments announcements Annuity assets audit auditing Australia B.Com. balance sheet bank Bank reconciliation banking basic accounting BBA benefits best bill black money blog bloggers book keeping bookkeeping Branch Accounting - full tutorial budget Budget variance business businessman CA calculator canada capital capital budgeting career cash cash book cash flow statement Chiense children china class coaching coins college commerce commerce students company computer computer accounting conference Contact vinod kumar corporate accounting cost cost accounting cost center cost centre CPA credit credit card cs currency data Debit and credit debit cards debt debtor degree depletion depreciation documents dollar domain Downloads Dubai e-accounting earning education Education Loans email employee EPF ERP euromoney examination excel excise duty expenses facebook factor of loan fans feature fifo FII fiji finacle finance Financial financial accounting fire insurance flickr flow forensic forex formula france fraud free fun function fund GAAP GDP gdr germany gold goodwill goodwill accounting google google apps google apps google base google buzz google calendar Google docs google finance google fusion tables google talk govt. GST guide health Hindi Hindi Language history holding company How to treat FBT in Tally 9 HRA ICAI ICAWI ICICI Bank IFRS income income statement Income Tax India indian railway Indonesia inflation inflation accounting infographics information inspiration insurance insurance accounting interest international Internet Introduction of Tally 9 inventory investment invoice IT Japan Job costing journal entries Kalculate keyboard kindle kuwait laptop law LBT learning lease lecture ledger leducation Leverage Analysis liabilities lifo linkedin loan logical point loss loss of profit M.Com. m.phil malaysia management accounting manual accounting manufacturing account market marketing mastercard material MBA MCA media migration mobile money ms word ms. excel multi currency in tally 9 Multicurrency Accounting mutual fund national security new and sacrifice ratio new york times new zealand news NGO nonprofit-accounting North Georgia Mountains NPV NSE odbc office oman online application online accounting otcei pakistan parents pay pal pdf pie chart pie chart of income pnb podcast ppf presentation price privacy policy prize money prof. vinod kumar profit profit and loss account project management provision purchase puzzles quickbooks Quote quotes quotes of svtuition rating agency ratio analysis RBI readers real estate rectification of errors remote control reports reserves responsibility accounting retirement revenue Revenue reserves review risk rupees salary sale saudi arabia saving sbi scholarship school SEBI security service tax share share trading Shares shri lanka singapore sms social accounting society solution South Africa stock stock exchange structure student students study subsidiary company svtuition swiss bank tally tally 9 Tally 7.2 Tally 9 Tally.ERP 9 tanzania tax Tax Accounting TDS teacher teaching technology test testimonial testimonials thailand tips trading trading on equity transaction trend trial balance tuition twitter UAE UGC - NET Commerce UK United Arab Emirates university usa valuation VAT Video Voucher and vouching wikipedia working capital youtube
false
ltr
item
Accounting Education: Internal Rate of Return Simplified
Internal Rate of Return Simplified
http://1.bp.blogspot.com/_DJEIRrK4tl4/S-UPGXBkpeI/AAAAAAAAFMM/9Gn86ixpeHU/s400/irr+simplified.PNG
http://1.bp.blogspot.com/_DJEIRrK4tl4/S-UPGXBkpeI/AAAAAAAAFMM/9Gn86ixpeHU/s72-c/irr+simplified.PNG
Accounting Education
http://www.svtuition.org/2010/05/internal-rate-of-return-simplified.html
http://www.svtuition.org/
http://www.svtuition.org/
http://www.svtuition.org/2010/05/internal-rate-of-return-simplified.html
true
2410664366776677676
UTF-8
Not found any lecture VIEW ALL Readmore Reply Cancel reply Delete By Home PAGES Lectures View All RECOMMENDED FOR YOU Category ARCHIVE SEARCH ALL Lectures Not found any lecture match with your request, please help to write it and send it to our email at vinod@svtuition.org for making this website free accounting and finance encyclopedia. Back Home Sunday Monday Tuesday Wednesday Thursday Friday Saturday Sun Mon Tue Wed Thu Fri Sat January February March April May June July August September October November December Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec just now 1 minute ago $$1$$ minutes ago 1 hour ago $$1$$ hours ago Yesterday $$1$$ days ago $$1$$ weeks ago more than 5 weeks ago Followers Follow THIS CONTENT IS PREMIUM Please share to unlock