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Management of special projects (compendium of lecture NUPSU)

2.1.6. Internal rate of return Internal Rate of Return (IRR)

Literature needs to be named: internal rate of return, internal rate of return, internal rate of return. An IRR project has a higher discount, with a yummy discount, a higher discount, with an IRR is a discount, with a NPV project is zero. IRR is higher than the maximum percentage for posiks, which you can pay for victorious necessary resources, if you get too much money on a free-flowing level.

Behind its IRR serpent is the point of view of profitability (more value for the win is not possible, and less is not necessary for the investor). The value of IRR is the point of non-upside, for example, the IRR> of the invested capital, then the shareholder of the company has a profit, the IRR <of the capital, then the meaning is the reduction of the current share.

The IRR method is a method for classifying investment propositions from countries of a boundary level of assets, investing in assets, at the same time at a discount to the cost of the project.

The IRR chart is carried out using the method of last-day approximation of the NPV value to zero at high discount rates. Rosrachunks are carried out for the formula:

In practice, the IRR is carried out for the following additional formula:

,

de A - the value of the discount rate when positive NPV is positive; In - the value of the discount rate, with any NPV negative; and - the value of positive NPV, with the value of the discount rate A ; b - the value of negative NPV, at the value of the discount rate B.

Table 2.3.

Buttstock for IRR

t

Bt-ct

1 / (1 + i) t at 10%

Bt-Ct at 10%

1 / (1 + i) t at 15%

Bt-Ct at 15%

0

-20000

1,0

-20000

1,0

20000

1

-12000

0,909

10908

0.870

10440

2

12000

0.826

9912

0.756

9072

NPV = 820

NPV = -488

IRR = 10% + ((820 / (820 + 488))? (15-10))% = 13.1%

The rule of thumb is to take projects as an IRR criterion: the IRR project is more significant for private investors more than the investor’s capital, but if you want to refinance the bank, and for the government, you will have to pay an additional discount. Much buti recommendations for finance.

Aly the IRR indicator is randomly calculated for an additional financial calculator, or for computer programs. In the financial calculator є the function for the IRR razrakhunka is awakened, it is enough to enter the entire CF value in the register of groshy streams and the “IRR” key. In that time, if groshy streams are to be reached by equal parts of leathers, for example, there is enough room for IRR, and the financial table of any factors is enough.

Indeed, NPV and IRR are important because the IRR is waiting for the very same project to be vibrated, because there are NPV vibrations at the bottom of the discount rate. Vibir projects for NPV are correct, the discount rate is correct. Offending methods to transfer, scho rymanіy іd іinvestitsіy groshі і streams іninvestuyutsya іd percent, a kind of expensive discount. Become involved in the NPV method, discount rate for the invested capital of the invested capital, for the IRR method, the discount rate for the fixed rate of NPV = 0.

If the IRR occurs, it’s difficult to:

1) It is not easy to give an unambiguous assessment of IRR for non-standard projects. The project is called non-standard, as a matter of fact the stretch, for example, for the life of the cycle, the significant grocery vitrati are transferred. For such projects, it’s possible to decode the version of the IRR, the IRR criterion cannot be downloaded in these sub-groups.

2) Zavosuvannya IRR is unprofitable for vibration of alternative projects on a large scale, different triviality and unequal hourly industrial hours.