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Hi,
What is the actual formula for Internal Rate of Return (IRR) please? (I have come across too many different versions)
Thanks
There is no ‘actual formula’! The only definition of the IRR is that it is that rate of interest that gives a NPV of zero.
There are several ways of arriving at the IRR all arriving at the same answer.
If you have watched my free lecture on this you will have seen that I do not use a formula at all. Once you understand what is happening, it is so easy and does not require a formula.
Also, the huge danger of just learning formulae (apart from the risk of forgetting them in the middle of an exam) is that they do not help much if you are asked to write about it (and 50% of the exam will be writing).If you do it my way (without a formula) then not only can you not forget the arithmetic in the exam, but any discussion about it becomes very easy indeed.
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