Finance 016 - Calculation of IRR by Trial and Error
Автор: De Ceuster Academy
Загружено: 2022-01-02
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Finance 016
Calculation of IRR by Trial and ErrorThe Internal Rate of Return is by definition the discount percentage for which the NPV = 0.
In fact, the IRR is the yield of the investment and has to be compared with the WACC or de RRR to verify if the investment is profitable for the company or organization.
The calculation of the IRR cannot be done directly and a method referred to as "Trial and Error" has to be used to find the value. This method is also called the bisection method.
The result is typically an irrational number with infinite repeating decimals and the number of decimals the result should have depends on the precision. Two decimal typically would be sufficient.
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