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#1
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IRR or NPV
Hi,
I'm trying to work out what the rate of return would be for the following equation. Essentially, our organization has a finance plan with a prepayment of 2 months followed by 10 months of equal payments. 60-90 days after the prepayment (depending on the effective contract date), the firm pays out the lump sum. I need to work up the effective rate from this. Inflow Lump sum $120,000 Fee 5% Total Financed $126,000 Upfront Payment 2 x 126000/12 paid Jan 31 2007 Monthly 126000/10 due monthly starting Feb 28 2007 Outflows $120,000 due Mar 31 2007 Is this as simple as doing an IRR calculation with payment 1 = 21,000, payment 2 = 10500, payment 3 = -109500 and the remaining 8 payments = 10500? This results in a total of 1.99% Any help GREATLY appreciated! Thanks Chris -- Thanks! |
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#2
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IRR or NPV
Yes it is. Your calculations are correct. Remember, like most financial
functions, since you gave IRR monthly payments, it will return a monthly rate. So IRR is telling you you are charging 1.99% per month interest for your services. Fred -- Regards, Fred "Calgarychris" wrote in message ... Hi, I'm trying to work out what the rate of return would be for the following equation. Essentially, our organization has a finance plan with a prepayment of 2 months followed by 10 months of equal payments. 60-90 days after the prepayment (depending on the effective contract date), the firm pays out the lump sum. I need to work up the effective rate from this. Inflow Lump sum $120,000 Fee 5% Total Financed $126,000 Upfront Payment 2 x 126000/12 paid Jan 31 2007 Monthly 126000/10 due monthly starting Feb 28 2007 Outflows $120,000 due Mar 31 2007 Is this as simple as doing an IRR calculation with payment 1 = 21,000, payment 2 = 10500, payment 3 = -109500 and the remaining 8 payments = 10500? This results in a total of 1.99% Any help GREATLY appreciated! Thanks Chris -- Thanks! |
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#3
Posted to microsoft.public.excel.worksheet.functions
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IRR or NPV
Thanks very much Fred!
Chris -- Thanks! "Fred Smith" wrote: Yes it is. Your calculations are correct. Remember, like most financial functions, since you gave IRR monthly payments, it will return a monthly rate. So IRR is telling you you are charging 1.99% per month interest for your services. Fred -- Regards, Fred "Calgarychris" wrote in message ... Hi, I'm trying to work out what the rate of return would be for the following equation. Essentially, our organization has a finance plan with a prepayment of 2 months followed by 10 months of equal payments. 60-90 days after the prepayment (depending on the effective contract date), the firm pays out the lump sum. I need to work up the effective rate from this. Inflow Lump sum $120,000 Fee 5% Total Financed $126,000 Upfront Payment 2 x 126000/12 paid Jan 31 2007 Monthly 126000/10 due monthly starting Feb 28 2007 Outflows $120,000 due Mar 31 2007 Is this as simple as doing an IRR calculation with payment 1 = 21,000, payment 2 = 10500, payment 3 = -109500 and the remaining 8 payments = 10500? This results in a total of 1.99% Any help GREATLY appreciated! Thanks Chris -- Thanks! |
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#4
Posted to microsoft.public.excel.worksheet.functions
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IRR or NPV
Hi Fred,
I just re-read your email more carefully! :) In the example below, is there a way you can think of that I can prove the 1.99%? My understanding of this is shaky... Thanks Chris -- Thanks! "Fred Smith" wrote: Yes it is. Your calculations are correct. Remember, like most financial functions, since you gave IRR monthly payments, it will return a monthly rate. So IRR is telling you you are charging 1.99% per month interest for your services. Fred -- Regards, Fred "Calgarychris" wrote in message ... Hi, I'm trying to work out what the rate of return would be for the following equation. Essentially, our organization has a finance plan with a prepayment of 2 months followed by 10 months of equal payments. 60-90 days after the prepayment (depending on the effective contract date), the firm pays out the lump sum. I need to work up the effective rate from this. Inflow Lump sum $120,000 Fee 5% Total Financed $126,000 Upfront Payment 2 x 126000/12 paid Jan 31 2007 Monthly 126000/10 due monthly starting Feb 28 2007 Outflows $120,000 due Mar 31 2007 Is this as simple as doing an IRR calculation with payment 1 = 21,000, payment 2 = 10500, payment 3 = -109500 and the remaining 8 payments = 10500? This results in a total of 1.99% Any help GREATLY appreciated! Thanks Chris -- Thanks! |
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