IRR: What is the IRR

What is the internal rate of return on an asset that gains you $ 7 and costs you $15 in period 2 ?

To solve for IRR with a period zero "cost" and a period N "benefit", we can use this equation:

i = (-An/A0)1/N - 1

Our example would look like this:

0 7
1 0
2 -15

Our A0 would be 7 because it is our period zero "cost".
Our An would be -15 because it is our period N "benefit".
Our N is 2 because we see the benefit in period 2.

i = (-(-15/7))1/2 - 1
i = (15/7)1/2 - 1
i = 1.463850 - 1
i = .4639 or 46.39%

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