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Unformatted text preview: equation is solved for NPV, while in the IRR method, the NPV is specified to equal zero and the discount rate (IRR) which forces this equality is found. Franchise L's IRR is 18.1 percent: 0 1 2 3 | | | | -100.00 10 60 80 8.47 43.02 48.57 18.1% $ 0.06 ≈ $0 if IRR L = 18.1% is used as the discount rate. therefore, IRR L ≈ 18.1%. A financial calculator is extremely helpful when calculating IRRs. The cash flows are entered sequentially, and then the IRR button is pressed. For franchise S, IRR S ≈ 23.6%. Note that with many calculators, you can enter the cash flows into the cash flow register, also enter r = i, and then calculate both NPV and IRR by pressing the appropriate buttons....
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This note was uploaded on 07/13/2011 for the course FIN 4414 taught by Professor Staff during the Spring '08 term at University of Florida.
- Spring '08
- Internal Rate Of Return (IRR)