Internal rate of return


August 30th, 2006 by admin admin

Internal rate of return is a term used in the finance industry. The rate is derived based on the assumption that the net present value of a project is zero. At this rate (IRR), the decision to go ahead with the project is neutral. This means that the project will not add value to the portfolio, neither will it deduct any value from your existing investment. To calculate the IRR requires a financial calculator as it involves a lot of iterations to arrive at zero NPV. Alternatively, you can also use Excel to perform the calculation as a predefined worksheet formula has been developed for this purpose. Read more about how to calculate IRR using Excel here.

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