Better Understanding of XIRR
I occasionally see an analysis of returns where someone will take the
present value of the future cash flows, and then apply XIRR to those present values. Since the present value already discounts the cash flow according to the discount rate, would XIRR in this case simply be a measurement of the rate of return on money that is already growing at the discount rate? Using a real example, if XIRR measures 15% IRR after three years on a cash flow of present values that were each calculated using a 12% discount, then is XIRR calculating 15% additional growth applied to 12% growth? -- W |
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