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 - www.wallstreetmojo.com/intern...
Subscribe to Our Channel -
KZbin ► / @wallstreetmojo
LinkedIn ► / mycompany
Facebook ► / wallstreetmojo
Instagram ► / wallstreetmojoofficial
Twitter ► / wallstreetmojo

[@pltcmod4425]

Very clear explanation. Thank you !

[@wallstreetmojo]

🎁 Check out our Free and Paid courses at www.wallstreetmojo.com/all-courses/

[@priyapillai3449]

Thank you so much! I am so relieved I managed to complete my assignment with your clear explanation. Keep going! Well done.

[@wallstreetmojo]

Glad it helped!

[@tarekalsherif57]

Thank you so much for the clear explanation!

[@wallstreetmojo]

You are welcome

[@francoisandrieu8101]

you are incredible thank you !!!

[@chathuranganeelaka4222]

Very clear explanation. Thank you so much.

[@wallstreetmojo]

You are welcome!

[@shahriarchowdhury3014]

Very clear explanation. Thank you so much. Please share the excel file.

[@Sai-tek]

Great Explanation

[@sudeepm8096]

Thank you very much!

[@wallstreetmojo]

Check out our Free and Paid courses at www.wallstreetmojo.com/all-courses/

[@fgb875]

super, you refresh my memory, super thank you! very clear explanation you are a super teacher!

[@wallstreetmojo]

Check out our Free and Paid courses at www.wallstreetmojo.com/all-courses/

[@user-we1xz3mo8b]

Awesome! Thank you.

[@wallstreetmojo]

🎁 Check out our Free and Paid courses at www.wallstreetmojo.com/all-courses/

[@digvijaychoudhari4128]

Keep going sir 👍👍

[@LalieB]

Ver clear! thank you!

[@wallstreetmojo]

🎁Check out our Free and Paid courses at www.wallstreetmojo.com/all-courses/

[@sabbrina78]

Good job

[@anosh441]

WELL DONE BRO

[@ethanklivans403]

effective pedagogy

[@wallstreetmojo]

Check out our Free and Paid courses at www.wallstreetmojo.com/all-courses/

[@ripaltandel7634]

I am looking forward to learn portfolio management ? How portfolio gets managed in a large size firm ?

[@obasholamohammed5851]

Thanks for the video. Kindly help do a video on how the projection can be made in reality

[@wallstreetmojo]

Appreciate your feedback, more content coming soon!

[@mohitsingha210]

In case of negative cash flows where IRR can give misleading results, what tool can we use to overcome this?

[@parulsethi4421]

You should make more videos like these on finance topics.

[@wallstreetmojo]

Appreciate your feedback, more content coming soon!

[@jagadishstar2690]

There was a lot of clarity in the explanation.

[@wallstreetmojo]

Glad we're on the same page, cheers!

[@Pinkword_993]

Can you help me with my project management assignment ??

[@muhammadasadullah827]

How if cash flows are on daily basis for one or two years? I calculated IRR through excel it was 196% I couldn't understand. Explain it plz in another video.

[@user-er4yk2op7t]

Deep Seas Submarine must implement a new engine in its submarines to meet the needs of clients who desire quieter operation. Two designs, both technologically feasible, have been created, and Deep Seas wishes to know which one to pursue. Design 1 would require an up-front manufacturing cost of $15,000,000 and will cost $2,500,000 per year for 3 years to swap out the engines in all its current submarines. Design 2 will cost $20,000,000 up front, but due to a higher degree of compatibility will only require $1,500,000 per year to implement. MARR is 10 percent/year. Based on an internal rate of return analysis, determine which design should be chosen. I assume since cashflow is negative its impossible to calculate IRR agree?

[@chintanhasnani6656]

can you share the excel sheet

[@edvilla4415]

WHAT IS THAT CASH FLOW? CASH FLOW FROM OPERATING, INVESTING OR FINANCING? OR NET CASH FLOW FOR ALL THE THREE.

[@gokulnaththeboss08]

It depends on project.if project is for operation then operating cash flow,if it for investment then investment cash flow

[@kiranakbm7568]

Explain about DCF

[@gokulnaththeboss08]

@@kiranakbm7568 just reversal of compound interest formula

[@ANA-db9yn]

How do you reject a project returning 40% and 50% but you just accept 35% only ?! 🤔

[@mohdsaafin1411]

Can we have NCFF Video

[@wallstreetmojo]

Thanks for reaching out! If you're keen on gaining insights from our industry experts and securing a certification, check out the details below. www.wallstreetmojo.com/all-courses/

[@conradtatge3992]

Sometimes I come in second to measure how the first did it.

[@unclemose74]

Use board some time instead of excel

[@wallstreetmojo]

Thanks for sharing your perspective!