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  • 1.  IRR Calculator

    Posted 03-22-2019 04:30 PM

    If you are in the business world, among the calculators you need is the IRR calculator. With this online calculator, you can calculate IRR or Internal Rate of Return. The IRR can be from different size of investment and cash flow on a particular period. Furthermore, it can also output the net cash flow and gross return.

    IRR calculator

    How to use IRR calculator

    Using this online calculator is very simple. You can enter the initial investment (expressed in dollars, but you can use it in various currency like Swiss, EUR, franks, and others). Then, you can choose the number of years of ash flow to analyze. The period can vary, but the maximum is 25 periods. Next, you can enter the cash flow of every period.

    You can now press "Calculate," and the IRR calculator will output the following:

    • Gross return in percentages
    • The internal rate of return or discount rate
    • Net cash flow (profit-loss)

    The internal rate of return

    The internal rate of return is the discount amount that creates the NVP or net present value of the cash flows from a specific project equal to zero. It is also called the economic rate of return as well as a discounted cash flow rate of return.

    The internal term means the exclusion of external factors such as currency inflation, capital cost, etc. It can provide more weight to previous cash flows compared to later cash flows because of the time preference of the investors. It is used for estimating the profitability of potential investments. The higher it is, the more advantage of taking the project, the lower it is, the riskier and undesirable.

    The IRR is used for ranking the prospective projects on an even basis. It is a good idea to combine IRR to metrics like NVP. Meanwhile, it must be used with caution because comparing it to projects of various expected lengths can be confusing.

    You must also keep in mind that IRR can't incorporate reinvestment rates that are directly related to the capital cost. Some prefer for MIRR or modified internal rate of return for cases if the capital cost is accounted for.

    IRR Formula

    NPV = / (1+ r) t – C0

    In using the IRR formula, there is no analytical solution to the problem. You can calculate it with the formula above. In this formula, the r is the discount rate, and Co refers to the initial investment, t is the amount of cash flow periods and the is the return during period t.

    The IRR calculator can do a recursive search until it finds out the value of r that results in NVP close to zero.

    Financial caution

    With the use of online IRR calculator, you can have a good start to estimate an investment's internal rate of return. Meanwhile, there is no means the end of the procedure. It is better to seek the advice of professional when you make critical financial decisions as well as long-term agreements including long-term bank deposits.

    Managing business operations is a difficult task. With this, you must get the best tools and techniques to make the most of your financial concerns. IRR calculator can help you to calculate the net cash flow, so you will know how much loss or profit you have in operating your business.

    With the help of the latest technology, you can now calculate the internal rate of return easily in an easy, reliable, and quick way. With the continuous innovation of technology, calculating finances can be easy and quick for business enthusiasts. Meanwhile, you must also take caution in using such calculators to avoid possible problems in the future.



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    Jhon Derick
    New York NY
    United States
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