Mathematical explanation of "Return on Investment" and "Rate of Return" with examples

Views: 18840
Christopher Vaughen

In order to calculate rate of return, a person needs their current value, how much their investments are worth and how much the investments were purchased at. Calculate rate of return by subtracting current value by original value and dividing that by the original value with lessons from a math teacher in this free video on math calculations for daily life.
Expert: Jimmy Chang
Bio: Jimmy Chang has been a math teacher at St. Pete College for nearly a decade. He has a master's degree in math, and his specialties include calculus, algebra, liberal arts, math and trigonometry.
Filmmaker: Christopher Rokosz

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eHow

"Try my "Hands-on Python for Finance" course on Udemy free for the first 100 people with code: HPFF0975 https://www.udemy.com/hands-on-python-for-finance/ "
http://alphabench.com/data/excel-npv-irr-tutorial.html
Tutorial demonstrating how to calculate NPV, IRR, and ROI for an investment. Demonstrates manual calculation of present values as well as the use of NPV and IRR functions in Excel. The spreadsheet used can be downloaded at:
http://alphabench.com/data/NPV-IRR_STR.xlsx
Capital Budgeting includes the analysis of various projects with financial measurements such as Net Present Value (NPV), Internal Rate of Return (IRR) and Return on Investment (ROI). This video discusses all of these concepts briefly while demonstrating the calculation of them using Excel.
Excel Functions:
NPV
IRR

Views: 52790
Matt Macarty

Every investment is expected to deliver a return, but what does "return" mean exactly? Find out in this tutorial, which defines return on investment (ROI) and shows how to calculate ROI. Watch more at http://www.lynda.com/Business-Data-Analysis-tutorials/Financial-Literacy-Making-Investment-Decisions/145931-2.html?utm_campaign=JWYCs8rRHzg&utm_medium=viral&utm_source=youtube.
This tutorial is a single movie from Making Investment Decisions by lynda.com author Rudolph Rosenberg. The complete course is 56 minutes and shows how to evaluate investments, assess risk, calculate a rate of return, and identify good professional and personal investment opportunities—no finance background required.
Introduction
1. What Is an Investment?
2. The Net Present Value (NPV) Methodology
3. Application to Real-Life Situations
Conclusion

Views: 24475
LinkedIn Learning

Formula and example for calculating annual rate of return on other investments like property.

Views: 32935
drpattv

This video explains the concept of IRR (the internal rate of return) and illustrates how to calculate the IRR via an example.
Edspira is your source for business and financial education. To view the entire video library for free, visit http://www.Edspira.com
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Views: 652097
Edspira

IRR or Internal Rate of return concept and calculation in excel explained in Hindi. IRR and NPV are capital budgeting metrics to estimate the profitability of a project, business or investment. Internal rate of return should be more than the discount rate to make an investment profitable.
Related Videos:
Net Present Value (NPV) - https://youtu.be/SpHIBfPGwx8
NPV vs IRR - https://youtu.be/kUV9xE2B7KU
Time Value of Money - https://youtu.be/Pazp1b2LhAQ
आईआरआर या इंटरनल रेट ऑफ़ रिटर्न का कांसेप्ट और एक्सेल में कैसे कैलकुलेशन किया जाता है इस वीडियो में समझाया गया है। आईआरआर और एनपीवी किसी प्रोजेक्ट, बिज़नेस या इन्वेस्टमेंट की प्रोफिटिबिलिटी का अनुमान लगाने के लिए एक कैपिटल बजटिंग मैट्रिक्स है। निवेश लाभदायक बनाने के लिए इंटरनल रेट ऑफ़ रिटर्न डिसस्कॉउंट रेट से ज़्यादा होनी चाहिए।
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In this video, we have explained:
What is Internal Rate of Return or IRR?
What is the definition of IRR?
How to calculate internal rate of return or IRR?
What is the concept of internal rate of return?
How to evaluate investment returns using IRR?
How to use internal rate of return to calculate net returns on an investment?
How to do IRR calculation in excel sheet or Google spreadsheet?
What is the formula for internal rate of return calculation?
What is the IRR calculation formula?
Which capital budgeting metrics are used to estimate the profitability of a project, business or investment?
How to do investment analysis?
What is the excel calculation formula for IRR calculation?
How to calculate IRR for a long-term project, business or investment?
How to make excel IRR calculator?
How to know if your investment is profitable?
Make sure to Like and Share this video.
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Hope you liked this video in Hindi on “Internal Rate of Return (IRR) - Calculation & Concept”.

Views: 62986
Asset Yogi

Brief description how to calculate Average Rate of Return. Useful for IBDP Business Management Unit 3.8

Views: 57247
Jason Marchant

OMG wow! Soooo easy I subscribed here http://www.youtube.com/subscription_center?add_user=mbabullshitdotcom for Internal Rate of Return or IRR.
In advance of going deeper into this approach, we need to evaluate the definition of "Rate of Return" (with no "internal" yet). Rate of Return would be the "speed" you are going to earn back profit on an annual basis, every twelve months, endlessly, in contrast to an amount you in the beginning invest. With the intention that it can be compared to the invested bigger sum, this is written just like a percent (%).
By way of example, if you invest 100 dollars, and you earn back 3 dollars per annum endlessly, then the "rate of return" is 3%. Trouble-free, is it not? But let us alter the situation somewhat. Suppose, on the same $100 investment previously mentioned, you will definitely make money for a couple of years... and not all in identical amounts in each year? And what if the money coming in will likely stop after a certain number of years? For instance, you are going to get $5 on your 1st year, possibly $8 on your 2nd year, $3 around the third year, and $95 during the fourth year (which could become a final year... so it's not ad infinitum). What is the rate of return now? As you can tell, on this most recent problem, it isn't really easy to find the percentage rate. This is because it's not as simple as in the initial case above for the reason that the annual cash flow is not just a standardizedsum (similar to the $3 in the initial situation above) and it's not without end. This percentage within this newest situation has become popularly known as Internal Rate of Return. Given that it is really not simple to get the percentage, we can easily declare it really is like "a hidden" percent... therefore the term "internal"... due to the reason that the word "internal" is similar to a formal way of expressing "hidden". How is the principle beneficial?
If the IRR of your respective undertaking or business enterprise is less than your cost of debt or the total interest rate you would pay to your bank (in case you raise funds money coming from the bank to do the investment or plan), then it is a foul deal. Exactly why? Remember! Because if you will pay 3% to your bank to accomplish a venture or make an investment decision, and then it produces an IRR of only 2%, then you definitely lose 1%. Then again, when your IRR or Internal Rate of Return is above the percentage at which one would borrow from the bank to cover an investment or task, then it is a fine deal, as a result of the helpful "spread" in between your rate of return and cost of debt. Similarly, in case your IRR is the same thing as the interest one would pay to your bank, then you're break-even. This, in summary, is really a simple clarification of IRR. Note that in more difficult problems, you might weigh up your internal rate of return not simply to your cost of debt, but to you cost of equity or weighted average cost of capital or WACC instead. http://www.youtube.com/watch?v=KKqzSGMz9Sk
what is irr, the internal rate of return, what is internal rate of return, irr, internal rate of return, khan academy, investopedia

Views: 537501
MBAbullshitDotCom

This is the way to calculate the IRR using Scientific Calculator.
In the cash flow pattern we can see that 3512.2 is the initial investment at the beginning of year-1 (at year-0) and rest of the amounts are the cash inflows though out the project's lifetime. IRR is the rate at which present value of all cash inflows are equal to the Initial investment.
(1000/〖(1+X)〗^1) +(1500/〖(1+X)〗^2) +(2000/〖(1+X)〗^3) -3512.2=0
So we set the equation of present value of all cash inflows considering the unknown rate (IRR) represented by ‘X’. Then we subtract the initial investment from the sum of present value of all cash inflows and set the equation equal to Zero. The IRR is the value of ‘X’ in which equation value is ‘Zero’.
First we have to write the equation in the calculator. For equal sing (=) we have to press ALPHA+CALC.
After putting the whole equation we have to press SHIFT+CALC (solve).
As the other side would be equal to zero, we have to press ‘0’ (zero) then press ‘=’(which is in the bottom right corner of the calculator). Then again SHIFT+CALC (solve).
Then wait . . . . .

Views: 88618
Nurul Amin

http://www.freeannuityinfo.net What's your REAL rate of return on your investment portfolio? It may be worse than you think.

Views: 4959
John Dubots

LIST OF FIN300 VIDEOS ORGANIZED BY CHAPTER
http://www.fin300.ca
FIN300 FIN 300 CFIN300 CFIN 300 - Ryerson University
ADMS 3530 - York University
Key Words: MHF4U, Nelson, Advanced Functions, Mcgraw Hill, Grade 12, Toronto, Mississauga, Tutor, Math, Polynomial Functions, Division, Ontario, University, rick hansen secondary school, john fraser secondary school, applewood heights secondary school, greater toronto area, lorne park secondary school, clarkson secondary school, mpm1d, mpm2d, mcr3u, mcv4u, tutoring, university of waterloo, queens university, university of western, york university, university of toronto, finance, uoft, reciprocals, reciprocal of a function, library, bonds, stocks, npv, equity, balance sheet, income statement, liabilities, CCA, cca tax shield, capital cost allowance, finance, managerial finance, fin 300, fin300, fin 401, fin401, irr, profitability index,

Views: 64059
AllThingsMathematics

Hi Guys, This video will show you how to find the expected return and risk of a single portfolio. This example will show you the higher the risk the higher the return.
Please watch more videos at www.i-hate-math.com
Thanks for learning !

Views: 205089
I Hate Math Group, Inc

Have you ever wondered how to calculate the rate of return on investment properties? Watch this short video to learn how to know what you should expect to know about income property return rates.

Views: 90
Realtepreneur

This video screencast was created with Doceri on an iPad. Doceri is free in the iTunes app store. Learn more at http://www.doceri.com

Views: 5103
MAT 150 Videos

Learn how to analyze a rental property with the unique "four square" method and make sure your next rental property investment is a cash cow!
In this video from BiggerPockets.com, Brandon Turner (author of The Book on Rental Property Investing and co-host of the BiggerPockets Podcast) shares with you the step by step method for determining the monthly cash flow and cash on cash return for any rental property investment.
Calculating the numbers on a rental property doesn't need to be difficult - and this video proves it.

Views: 1163286
BiggerPockets

simple rate of return, net present value, NPV, internal rate of return, IRR, payback period, cost of capital, capital budgeting, Present value of single amount, present value of annuity, ordinary annuity, annuity due, future value of annuity, future value of annuity

Views: 3486
Farhat's Accounting Lectures

Project management topic on Capital budgeting techniques - NPV - Net Present Value, IRR - Internal Rate of Return, Payback Period, Profitability Index or Benefit Cost Ratio.

Views: 455535
pmtycoon

An Incremental rate of return analysis between two cash flows, using hand calculations and Excel. This is taught in a engineering economics class.
Here is my book of 55+ Engineering Economics problems http://goo.gl/KKOx0q

Views: 35968
Tall Bridgeguy

If you're going to invest your money, you'll want to make sure you're getting the most from your investment. That's exactly what the internal rate of return calculations are for. They help you compare investments, and make sure you make your best financial decisions.
Here's everything you need to know about the Internal Rate of Return function. View the companion tutorial and download an example spreadsheet at Tuts+ for free: .
By Bob Flisser.

Views: 11727
Tuts+ Computer Skills

In finance and economics, nominal rate refers to the rate before adjustment for inflation (in contrast with the real rate). The real rate is the nominal rate minus inflation.
Real rate of return can indeed be negative. When real rate of return are negative, it means that the inflation rate is larger than the nominal interest rate. Measuring the real rate of return lets investors determine if they are actually making money and growing purchasing power on an investment. If the real rate of return is not larger than inflation, the investor is losing money.
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Views: 8543
Yadnya Investment Academy

Discover our straight-forward and easy to use formula for calculating the numbers on a prospective rental property purchase.
Welcome to Hipster’s first how-to video! I’m going to show you how to run quick numbers on a rental property. You can use this easy and fast formula for any property you’re looking at. I'll be behind the scenes doing the calculations on my white board and calculator (yes, it really is that big!) to show you how it works. This is an actual rental property I'm using as an example, including the actual purchase price and numbers. (You have to love my handwriting!) You always want to verify the numbers you run before you buy any property (for example, with a property manager), but it helps to do your homework first. This particular house is in Indianapolis and gets $1,075 in rent. It was built in 2002. Super cute little house: three bedroom, two bath. But all we care about right now is the numbers…
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Have you thought about real estate investing but ruled it out because it sounded complicated or risky?
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Are you a cool person who I’d just enjoy saying “hi” to?
If you answered "YES" to any of those questions, then we should talk. I help people just like you to find smart, safe, passive real estate investments so your money is working hard for you, even if you lack real estate investing knowledge.
If you're cautious or nervous, then I can help you get educated on the best real estate investments possible and guide you towards getting that first investment property under your belt. When the passive income starts flowing, you'll be hooked and be ready for more properties, and I can introduce you to actual high quality deals and partners that I would, and do, actually invest in myself. I promise, I won’t refer you to anyone I haven’t personally bought through myself. (true story)

Views: 369412
Hipster Investments

Learn to budget, beat debt, & build a legacy. Visit the online store today: https://goo.gl/GjPwhe
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The Dave Ramsey Show channel will change the way you experience one of the most popular radio shows in the country!

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The Dave Ramsey Show

omg WOW so easy I watched here http://MBAbullshit.com IRR Internal Rate of Return in 3 minutes
If You Like My Free Videos, Support Me at https://www.patreon.com/MBAbull
Imagine you found a wizard with a boat on a magic river... For every $100 you gave the wizard.. He would give you back $10/year FOREVER and ever! So how much % do you get every year? 10%. Because $10 is 10% of $100. Guess what? This 10% is called your RATE of RETURN (careful, this is not yet your INTERNAL rate of return...) So this 10% Rate of Return tells you HOW QUICKLY you get back your money in EXACTLY 1 year... compared to your original $100.
So this 10% Rate of Return tells you HOW QUICKLY you get back your money in EXACTLY 1 year... compared to your original $100. Now what if... It wasn't that simple... What if the wizard brought you back a different amount every year? http://www.youtube.com/watch?v=7w-UWuDi0fY On some lucky years, he might bring back $70 On other years, he might bring back only $5.. And what if... It was NOT forever? What if it was for exactly 7 years? What is your % Rate of Return now? Not so easy to know now, right? It's like the rate of return is now HIDDEN... This "hidden" rate of return is now called the INTERNAL Rate of Return or simply IRR.
To find the exact %, we use the IRR Formula. Don't panic! I promise it's much easier that it looks! So if you know your business' Internal Rate of Return, how do you use it? This simplest example is this: Let's say you borrowed money to buy a candy machine for business. When you compare the money you earn from the candy machine with the amount you paid for the candy machine, you can compute your candy machine's IRR... ... and when you know your candy machine's IRR, you can then compare it to your borrowing cost. If your business borrows money from the bank at a 4% interest rate and your Internal Rate of Return is 10%, then you WIN 6%... Because 10% minus 4% is 6%. On the other hand, if your business borrows money at a 4% interest rate, but your candy machine's IRR is only 3%, then you LOSE.

Views: 279280
MBAbullshitDotCom

HOW TO CALCULATE ACCOUNTING RATE OF RETURN IN 5 STEPS - Learn how to calculate ARR in a few minutes. If you would like to learn more about this subject please visit:
https://tiduko.com/how-to-calculate-accounting-rate-of-return/

Views: 42636
TIDUKO

This video explains how to calculate the total return on an investment as a percent.
http://mathispower4u.com

Views: 362
Mathispower4u

Given the price data for an investment how do you find the rate of return?

Views: 9579
TimevalueVideos

Description: How to calculate net present value (NPV) and internal rate of return (IRR) in excel with a simple example.
Download the excel file here: https://codible.myshopify.com/products/npv-and-irr-in-excel-2010-excel-files
Some good books on Excel and Finance:
Financial Modeling - by Benninga:
http://amzn.to/2tByGQ2
Principles of Finance with Excel - by Benninga:
http://amzn.to/2uaCyo6

Views: 884168
Codible

Rate of return on Incremental Investments

Views: 8329
Engineer Clearly

Please order ebook/audiobook of this video to support our channel https://www.smashwords.com/books/view/799232, https://www.amazon.co.uk/Return-on-Investment-Crash-Course/dp/B078SJ8VCP/ref=sr_1_1?ie=UTF8&qid=1541448906&sr=1-1&keywords=Return+on+Investment+introbooks or https://www.audible.com/pd/Return-on-Investment-Crash-Course-Audiobook/B078SGN6SH?qid=1541448913&sr=sr_1_1&ref=a_search_c3_lProduct_1_1&pf_rd_p=e81b7c27-6880-467a-b5a7-13cef5d729fe&pf_rd_r=JZ63RQQYA4AQ34G65BM1&
Return on Investment can be calculated for a number of things.
It is not just businesses but even investors who are able to use the formula to identify whether an investment is going to result in benefits or not.
It also helps people make the most appropriate choice from a range of options available.

Views: 1010
Education Channel

R.O.I Is THE Most Important Thing When Buying Rental Real Estate
There's one thing I look for when buying rental properties and it's my return on investment, or ROI. It's easy to get distracted by things that aren't important to the process. In this video I'm going to explain how to analyze a property in order to figure out THE most important thing when buying rental real estate.
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Views: 31685
Morris Invest

This video is second in a short series providing an example of when a geometric mean would be most appropriate.

Views: 954
Kevin Pledger

How to calculate a required rate of return (or required return) from a real risk free rate, an expected inflation rate, a nominal risk free rate, a default risk premium, a liquidity risk premium, and a maturity risk premium. Explanations are also provided for each of the elements of the required rate of return.
http://finlingo.com

Views: 1636
Finlingo

IRR (Internal Rate of Return) is a very useful tool to have in life, business, and in real-estate investing. It allows you to easily find the return on a uneven set of cashflows. In real-estate, we have the boring, static cap-rate which only allows us to find the yearly return of a cashflow. But what about the initial investment, the income over many years, and the actual sale of the property? All those things provide us sweet, sweet returns and we need to factor those in too! IRR allows us to do just that!
▼ Learn More! ▼
Blog Post (Excel Spreadsheet Included):
http://www.cheaphouseswilmington.com/real-estate-irr-excel/
Connect on Linkedin:
https://www.linkedin.com/in/teddysmithnc
Download my FREE spreadsheet:
http://www.cheaphouseswilmington.com/free-real-estate-investment-calculator-spreadsheet/
Follow me on Twitter:
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Views: 8649
Teddy Smith

This short video considers the Geometric Mean and in particular presents a calculation of the Geometric Mean Rate of Return for the value of a portfolio over time.

Views: 910
Maths and Stats

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We are talking about the average accounting rate of return, which is equal to the average net income divided by the average book value.
Learn more: https://www.cfa-course.com/cfa-corporate-finance-and-portfolio-management/corporate-finance/capital-budgeting/investment-decision-criteria/average-accounting-rate-of-return.html
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No matter if you're interested in quantitative methods or economics, our online courses provide you with exam-orientied explanations that led you understand even the toughest issues.

Views: 19348
cfa-course.com

In this video, you will learn about the Accounting rate of return method of Capital budgeting.

Views: 10197
maxus knowledge

The IRR function is a useful management tool to calculate the worth of an investment from an internal and cash flow point of view.
It can be used to compare different outlays which may generate different cash flows so that decisions can be made.
The file can be downloaded for practice for free from:
http://unitedcomputerconsultants.com/excel
Look for the file "IRR"
Visit us at : http://unitedcomputerconsultants.com
Join us at: : http://facebook.com/unitedcomputerconsultants
Tweet us at: http://twitter.com/geoffhudson7

Views: 1748
United Computers

A quick description of Net Operating Income, Capitalization Rate, and Price - What they are, how they interact with each other, how to use them, etc.
If I have made any mistakes, or omitted what seems like important relevant info then please message me or leave a comment!
http://relevantproperties.com

Views: 143577
InvestRelevant

In this video we will learn how to calculate the Internal Rate of Return of an investment (i.e the IRR).

Views: 21063
Calculator Expert

For an experienced SF Bay Area real estate agent visit http://iLiveInTheBayArea.com
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Welcome to part two of my investing terms video. We're going to continue off of the same scenario we were speaking of in my "Investing Terms Part 1" video, which discussed NOI, Cap Rate and Cash on Cash.
As a refresher of what the details were in regards to the property, we were looking at a $2m income property that made $150k NOI. We figured the cap rate was 7.5%, and that if we used leverage our cash on cash return jumped up to 8.775%.
Now, we're going to get into the two more complex formulas. The first one we're going to go over is called Internal Rate of Return, or IRR. The second is called Net present value, or NPV. Both of these can correlate with each other quite often, but let's take them on one by one.
First, the IRR concept. IRR basically is looking at the investment OVERALL, from START to FINISH -- and the key word there is FINISH because there must be an exit strategy -- and determining how what percentage you made. So let's take a look at our property. $2M to buy it cash, $150k for 3 years, and then at the end of the 3rd year a huge bonus of $4M. Using IRR we've made 32.10%. As I explained our money has made 32.10% every year from start to finish...again, the key word there is finish.
Which brings us finally to the Net Present Value, or NPV. Net Present Value means to convert all the future cash flows into today's dollars. Which even for me is still a bit of a confusing way to understand it. Let's go back to the bank we just left. Here you are sitting at a table with a good investor friend of yours.
You tell your friend all the details of what just happened the last 3 years. How you gave the bank $2M and they gave you back $150k every year for 3 years...then how after 3 years you went to go take your $2M out and instead they gave you $4M. You're good investor friend explains everything about the Internal Rate of Return and basically how much money you just made year after year.
While you guys are talking, he or she asks you...how much were you okay with making??? Kind of an odd question, but a valid one. As an investor, you have to know how much you are comfortable with making. This is discussed more in my "Determining Net Present Value" video.
For the sake of argument, let's say you tell your friend you were more than comfortable making 20%, and that over 32% was great, but MUCH higher than you expected. What you can now do is determine the Net Present Value. In other words, if you could go back in time and see what you would make per year and when you took your money out, how much *COULD* you have paid in the BEGINNING and still have made that 20%?
Well, let's look at our property in the same fashion. Making $150k/year and you make $4M at the end of 3 years, how much more could you have paid to still make a 20% IRR? After plugging in a few numbers, the amount it $630,787. In other words, if you pay the original $2M, PLUS the additional $630,787, you're new IRR will be 20%...right at the percentage you were comfortable with...
Now at this point you may be asking why you would need this information?? Let's say you are looking at a property and there are a lot of interested buyers and of course multiple offers. Obviously there can only be one buyer.
By knowing your desired NPV and plugging it in your formula you can see how high would be your maximum to where you would still make your desired return. This works in the opposite manner. If you're looking at this same property and your NPV target was 35%, you would be finding out how much LESS you had to pay for the property.
Remember that if you're looking for a quick judgment snapshot, think of IRV for your cap rate formula. If you're looking to hold a property for a while and what to figure out what your making after all expenses -- even if you have a loan, use your cash on cash formula. If want to know the true value of your investment from start to finish, think internal rate of return.
And if you're trying to find out the difference of what you need to accomplish to hit that target IRR, think of the Net Present Value. Of course, there's a few more formulas out there in the investment world, but when it comes to income property, these will definitely give you a leg up in determining what your investment is really worth...now that's good to know.
Contact Davide Pio Today | SF Bay Area Real Estate
http://iLiveInTheBayArea.com | 510-815-2000

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Davide Pio - CCIM, LEED AP

NPV vs IRR conflict is discussed in Hindi. NPV and IRR calculation explained with example i.e. when net present value and internal rate of return give different results while evaluating projects or investments.
Related Videos:
Net Present Value (NPV) - https://youtu.be/SpHIBfPGwx8
Internal Rate of Return (IRR) - https://youtu.be/x6eXfx2Tv-w
Time Value of Money - https://youtu.be/Pazp1b2LhAQ
इस वीडियो में एनपीवी वर्सेज़ आईआरआर कनफ्लिक्ट पर चर्चा की गई है। एनपीवी और आईआरआर कॅल्क्युलेशन उदाहरण के साथ समझाया गया है यानी जब नेट प्रेजेंट वैल्यू और इंटरनल रेट ऑफ़ रिटर्न प्रोजेक्ट्स या इंवेस्टमेंट्स का मूल्यांकन करते समय अलग-अलग परिणाम देती है।
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In this video, we have explained:
Which one is better - NPV vs IRR?
Which one is a better option for projects and investment calculation between NPV and IRR?
What to do when NPV and IRR give different results while evaluating projects or investments?
What is the difference between net present value and internal rate of return?
When should you opt for IRR and when for NPV for investment return calculation?
How NPV is different from IRR?
How to do NPV and IRR comparison for any project and investment?
Which is a better calculation method for investment matric NPV and IRR?
How to calculate net present value and internal rate of return in excel?
What is the calculation formula for NPV and IRR?
Why NPV is better calculation method for calculating investment returns?
What makes IRR a better option for investment return calculation method?
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Hope you liked this video in Hindi on “Net Present Value vs Internal Rate of Return (NPV vs IRR)”.

Views: 21422
Asset Yogi

Accounting for evaluating assets relative to activity (turnover) and profitability, 1-Asset Turnover Ratio, 2-Profit Margin on Sales and 3-Rate of Return on Assets, (1) Asset Turnover Ratio: How efficiently a company uses its assets to generate sales, (net sales/average total assets) = equals asset turnover ratio, (2) Profit Margin on Sales Ratio: (Rate of Return on Sales), how profitably the company uses its assets, (net income/net sales) = profit margin on sales, and (profit margin on sales x asset turnover ratio) =rate of return on assets, (3) Rate of Return on Assets (ROI): The rate of return a company acheives through use of its assets, (net income/average total assets) = rate of return on assets, detailed calculations by Allen Mursau

Views: 18375
Allen Mursau

Views: 10173
Joseph Baltrus

*Mode: Normal*
In the cash flow pattern we can see that 3512.2 is the initial investment at the beginning of year-1 (at year-0) and rest of the amounts are the cash inflow though out the project's lifetime. IRR is the rate at which present value of all cash inflows are equal to the Initial investment.
(1000/〖(1+X)〗^1) +(1500/〖(1+X)〗^2) +(2000/〖(1+X)〗^3) -3512.2=0
So we set the equation of present value of all cash inflows considering the unknown rate (IRR) represented by ‘X’. Then we subtract the initial investment from the sum of present value of all cash inflows and set the equation equal to Zero. The IRR is the value of ‘X’ in which equation value is ‘Zero’.
First we have to write the equation in the calculator. For equal sing (=) we have to press ALPHA+CALC.
After putting the whole equation we have to press SHIFT+CALC (solve).
As the other side would be equal to zero, we have to press ‘0’ (zero) then press ‘=’ sign.
Then wait . . . . .

Views: 42624
Nurul Amin