IRR and MIRR and Discounted Payback
The new project has a cost of $52,125, its expected net cash inflows are $12,000 per year for 8 years, and its cost of capital and its cost of capital is 12 percent.
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What is the project's IRR and MIRR and Discounted Payback?
The internal rate of return is defined as that discount rate which equates the present value of a project's expected cash inflows to the present value of the project's costs:
PV(Inflows) = PV(Investment costs), or the rate which forces the NPV to equal zero.
NPV = sum of CFt where CF is the cash flow
(1 + IRR)n IRR is the internal rate of return
n is the period.
NPV = -52,125 + 12,000 + ...
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