On Wednesday, October 22, 2014 6:26:08 AM UTC+5, joeu2004 wrote:
"LaWhore Mama" wrote:

I have an investment with $100M outflow then an inflow of $230M

finally an outflow of $132M

[....]

How in the world we have an IRR of 10% and 20% when lost

$2,000,000



There is nothing wrong with the Excel IRR implementation in this case.

There is something wrong with your understanding of what the IRR

mathematical concept is.


Very simply, the IRR is the rate causes the sum of the discounted cash (NPV)

to be zero.


There is no doubt that 10% and 20% do just that.



-100 + 230/(1+10%) - 132/(1+10%)^2

= -100 + 209.09 - 109.09 = 0



-100 + 230/(1+20%) - 132/(1+20%)^2

= -100 + 191.67 - 91.67 = 0



I hope even your CFO can understand the arithmetic. ;-)

Hello Joeu2004! Thank you very much for your explanation or definition of the IRR - internal rate of return. I passed on this information to my CFO


joeu2004 wrote:
In financial analysis, the purpose of the mathematical IRR is to compare

different investment opportunities with cash flows arises at different

times. Hopefully your CFO will remember that from his/her Business 101

class.

Just about an hour ago my CFO called me to come over to his offices. When I arrived he said he read the biopsy report on the IRR moratorium.

This is what he had to say

"If an investment does not have a payback period then there is no return from the investment. And an IRR and payback period have a one to one relationship whereby an IRR occurs at the payback period."

So is there any way to find the payback period on this investment?

Thank you, answers to this paradox holds high stakes for me as I depend on this "job" to support my family