What is the economic implication of IRR?

Internal Rate of Return (IRR) refers to the net present value of the project as the sum of the discounted value of the annual cash flows of the investment project.

The discount rate at which the net present value is zero.

It is the internal rate of return of the project.

The internal rate of return is the discount rate at which the total present value of the inflow is equal to the total present value of the flow and the net present value is equal to zero. If you do not use an electronic computer.

The internal rate of return is trialed using a number of discount rates until the discount rate at which the NPV is equal to or close to zero is found. The internal rate of return is the rate of return that an investment aspires to achieve, and it is the discount rate when the net present value of the investment is equal to zero. It is the rate of return that an investment aspires to achieve, and the bigger the metric, the better.

In general, the project is feasible when the internal rate of return is greater than or equal to the benchmark rate of return. The sum of the discounted value of the annual cash flows of the investment project is the net present value of the project, and the discount rate when the net present value is zero is the internal rate of return of the project. In the economic evaluation of the project, according to the different levels of analysis, the internal rate of return has the financial internal rate of return.

and the internal rate of return of the economy. The most commonly understood internal rate of return is the investment income of the project.

The ability to withstand currency depreciation, inflation. For example, the internal rate of return of 10% means that the project can withstand a maximum of 10% currency depreciation or 10% inflation every year during the operation of the project. The internal rate of return is to make the present value of the cash flow generated by an investment in the future just equal to the rate of return at the cost of the investment when considering the time value, rather than "whether the net present value is high or low, so it doesn't matter", which is an idea of putting the cart before the horse.

Because the premise of calculating the internal rate of return is to make the net present value equal to zero. To put it in layman's terms, the higher the internal rate of return, the lower the cost you have invested, but the more you have gained. For example, the cost of investment A and B is 100,000 yuan, the operating period is 5 years, and A can obtain net cash flow every year.

30,000, B can get 40,000, through calculation, it can be concluded that the internal rate of return of A is about 15%, and B's is about 28%, which is actually through the present value coefficient of annuity.

The table can be seen.

What is expressed above is the internal rate of return.

The economic internal rate of return refers to the discount rate at which the cumulative value of the discounted value of the proposed project's economic net cash flows in each year of the calculation period is equal to zero. It reflects the ability of the project to create benefits for the national economy and is the main indicator of the national economic evaluation. In practice, the practical solution method is exactly the same as that of the financial internal rate of return.

The economic internal rate of return of the project is compared with the social discount rate (IS), and when the EIR is, the project is considered to be macro-economically viable; Otherwise, the project is not economically viable. When comparing project plans, it is preferable to use the one with a large economic internal rate of return.

It is a relative indicator that reflects the project's contribution to the national economy.

Internal rate of return.

That is, the total present value of the inflow of funds is equal to the total present value of the capital flow, the net present value.

It is equal to the discount rate of Qi Dan zero hour.

So do netizens know what the economic meaning of the internal rate of return is? Let's find out.

1. The most popular understanding of the internal rate of return is the investment income of the project or the ability to withstand currency depreciation and inflation.

2. For example, the internal rate of return of 10% means that the project can withstand the maximum currency depreciation of 10% or inflation every year during the operation of the project.

That's all there is to know about what the economics of IRR are.

Internal rate of return refers to the discount rate at which the total present value of capital inflows is equal to the total present value of capital outflows and the net present value is zero. The internal rate of return is the rate of return that an investment aspires to achieve, and it is the discount rate at which the net present value of an investment is equal to zero. Without the use of a computer, the IRR must be calculated using multiple discount rates until a net present value equal to or infinite near zero discount rate is found.

The advantage of the IRR method is that it can link the revenue over the life of a project to its total investment and indicate the yield of the project so that it can be compared to the benchmark return on investment to confirm whether the project is worth building in the industry. When borrowing for construction, when the borrowing conditions, i.e., the interest rate, are not very clear, the IRR method can circumvent the borrowing conditions and first obtain the IRR as the upper limit of the acceptable borrowing rate. However, the IRR represents the ratio, not the absolute value, and the scheme with a lower IRR is more worthwhile because it is larger and may have a larger NPV.

Therefore, when comparing various options, it is important to consider both the guessing of the internal rate of return and the net present value.

a.The discount rate at which the net present value of the investment solution is equal to 0.

b.The discount rate at which the present value index of the investment scheme is equal to 1.

Correct answer: Make the net present value of the investment proposal equal to the discount rate of 0; The discount rate at which the present value index of the investment proposal is equal to 1.