Internal Rate of Return
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The Internal Rate of Return of a project is the discount rate which makes it NPV to zero. The IRR is compared with RRR or cost of capital. If the IRR exceeds the required return, the project is accepted; if not the project is rejected:
Example 1:
Consider the following cash flows and calculate IRR.
(Acceptance Criterion: The higher the IRR the better the project)
Related Topics
Capital Budgeting Problems
Further Readings
References
Financial Management: Theory and Practice, Dr Eugene F Brigham & C Micheal Ehrhardt
Fundamentals of Financial Management: Concise Edition, Brigham Houston
The Economist Guide to Financial Management, John Tennet
Financial Management: Core Concepts, Raymond M Brooks
Super notes