internal rate of return


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Related to internal rate of return: Net present value, Payback period

Internal rate of return (IRR)

Dollar-weighted rate of return. Discount rate at which net present value (NPV) of an investment is zero. The rate at which a bond's future cash flows, discounted back to today, equal its price.

Internal Rate of Return

The discount rate at which the cash inflow on an investment equals its cash outflow. That is, the internal rate of return is the return necessary for the present value of an investment to equal what one spends in making the investment. Importantly, the internal rate of return accounts for inflation. See also: Yield to maturity.

internal rate of return (IRR)

The rate of discount on an investment that equates the present value of the investment's cash outflows with the present value of the investment's cash inflows. Internal rate of return is analogous to yield to maturity for a bond.

internal rate of return

see DISCOUNTED CASH FLOW.

internal rate of return

see DISCOUNTED CASH FLOW.

internal rate of return

The annual rate of earnings on an investment equates the value of cash returns with the cash invested,taking into consideration the power of compounding interest.The following formula requires a trial-and-error method for solution. The fallacy with the method is its assumption that all cash flows are reinvested at the internal rate of return.

Using this formula,CF is the cash flow in each period,with one subpart of the formula for each investment year until you reach n,the final year of the investment.You have to solve for R, the annual rate, by trial and error.

References in periodicals archive ?
Fisher's rate of return over cost is the internal rate of return of the marginal cash flows of the two projects.
At that time the company had found that for them, the pretax internal rate of return over the life of a typical horizontal Barnett Shale well, using a monthly discounting convention, ranged between approximately 18% and 147%, with a mid-point of 62% which is representative of the Company's expected rate of return prior to running sensitivities.
The ratings of the combination notes address the return of the stated balance of principal by the legal final maturity date, as well as an internal rate of return (IRR) of 6.
The class VIa notes, class VIb notes, class A combination notes, and class C combination notes are all rated to the ultimate receipt of their principal balances and a specified internal rate of return (IRR).
The rating of the participation notes addresses the receipt of the stated balance of principal by the legal final maturity date and an internal rate of return on the original investment of 6%.

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