Скачать или смотреть IRR explained in simple terms (what a bank should pay you to match the projects expected cashflows)

Follow Along File- https://auditexcel.co.za/product-down...
00:00 What does IRR mean- example
00:19 Comparing project cash flows to a bank account with interest earned
01:45 IRR and interest earned in a bank account (or through bonds) can be compared taking risk into account

XIRR-    • XIRR function in Excel. Why it is better t...  
IRR-    • IRR Excel formula, how it works. Link to w...  
MIRR-    • Problem with IRR and alternate MIRR in Excel  

Lets just step back and understand what the IRR means and why we compare it to an investment from a bank.

To follow along go to 17.11

In our example we generate an answer of an IRR of 50.57%. Below we have set up a bucket where we put the money into a bank and ask them to pay us out the same amounts that the project would generate at the same time. We ‘grow’ this investment at 50.57% as if the bank is paying us 50.57% interest per year.

As seen below we end up on the final payment of 18 677 with a closing balance of zero. So by growing our initial 20 000 at 50.57% and getting repayments as per the project cash flow, at the end of the project the bank owes us nothing.

IRR
Problems with IRR to watch out for
IRR is a very popular method of assessing a series of cash flows. It does however have some problems being:

If cash flows fluctuate from negative to positive often, there can be multiple answers
As it is an iteration calculation it may not find the answer unless you give it a similar guess number. So if you get an error message, try changing the guess number.
For IRR’s that are large, it makes the assumption that you can take the cash you received and invest it at the same rate. This could be difficult to replicate (look at MIRR below).
If you have very short periods of time, the IRR can be misleading. If I go to a casino, bet on red and win, IRR assumes that I can do the same thing every day for the year. So my 1 on day 1 becomes 2 on day 2, 4 on day 3, 8 on day 4 etc. The IRR is enormous and unrealistic.