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Unformatted text preview: Internal rate of return is very advance method of capital budgeting and it is based on time value of money . Like NPV and P.I., we also calculate the present value of cash inflows and cash outflows in this method. But this method is purely different from NPV and PI. Before understanding this method of evaluation of investment projects , you should know what is internal rate of return. Definition of Internal Rate of Return If you have read the books of financial management of MBA or B.Com. class, you can give the definition of internal rate of return. Like other writers, I can also write that internal rate of return is the rate at which the present value of all cash inflows is equal to the present value of all cash outflows. After finding internal rate of return, we will accept that investment project whose internal rate will high or if there is only one cash outflows....
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- Fall '10