I have a problem with a discrepancy between two different IRRs
(calculated on the same cash flow but in two different ways) that, in my
opinion should be exactly the same.


Hi. I'll try my best here.

For #1, all payments after time 120 were brought back to time 0 at the
unknown irr rate. The higher rate for the Home Equity Loan was spread
out from 10 years, to 20 years. Hence, the IRR for IRR #1 should be lower.

Mathematically, all payments from 121 to 240 were brought back to time
120 at the IRR rate, and then brought back to time 0 at the IRR rate also.

However, for #2, you used the remaining loan balance at time 120. You
brought all payments after 120 to time 120 at the known mortgage rate,
and then brought it to time 0 at the IRR rate. The high Equity Loan is
not part of any calculations after time 120 as in the first example.
These two differences are why they are different.

Hope I said this right. :)

Dana DeLouis



On 12/23/09 7:10 PM, Ben wrote:
Hello all,
I have a problem with a discrepancy between two different IRRs (calculated
on the same cash flow but in two different ways) that, in my opinion should
be exactly the same.
Any one willing to take a crack at it and maybe provide some kind of
explanation is welcome to contact me at , and I will send over
the excel sheet with the problem. Please note that a basic understanding of
the time value of money and financing is required.
Thanks in advance for any assistance,
Ben.