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Internal Rate of Return (IRR) – Basics, Formula, Calculations in Excel (Step by Step) [Video]

Internal Rate of Return (IRR) – Basics, Formula, Calculations in Excel (Step by Step)

Chapters
00:00 – Introduction
01:30 – What is Internal Rate of Return?
03:55 – Trial and Error Method to Find IRR
07:26 – Using IRR Function in Excel
09:27 – Understanding IRR Formula
15:00 – Using IRR to Compare Two Projects
17:45 – Uses of IRR

In this video, we will talk about the Internal Rate of Return or IRR, its formula, calculations, and uses.

What is IRR?
IRR is the discount rate at which a project’s returns become equal to its initial investment.

Formula for IRR
Find IRR when NPV = 0

NPV = CF0 + CF1/(1+IRR) + CF2/(1+IRR)^2….. = 0

Advantages of IRR:
It considers the time value of money
An easy-to-implement tool
The project’s potential is defined accurately by using IRR

Disadvantages of IRR:
Sometimes, it remains ineffective
It can be used only with NPV
Multiple values

#wallstreetmojo, #IRR, #internalrateofreturn

For more details, you can refer to our article at – https://www.wallstreetmojo.com/internal-rate-of-return-irr/

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