{"id":148,"date":"2011-08-06T13:47:51","date_gmt":"2011-08-06T06:47:51","guid":{"rendered":"https:\/\/mbabullshit.com\/blog\/?p=148"},"modified":"2017-09-14T12:06:34","modified_gmt":"2017-09-14T05:06:34","slug":"irr-internal-rate-of-return-explained","status":"publish","type":"post","link":"https:\/\/mbabull.com\/blog\/2011\/08\/06\/irr-internal-rate-of-return-explained\/","title":{"rendered":"IRR in 3 Easy Steps: Internal Rate of Return"},"content":{"rendered":"<h2>See infographic and download FREE cheatsheet at bottom<\/h2>\n<h2>3-Minute Overview<\/h2>\n<p><iframe loading=\"lazy\" src=\"http:\/\/www.youtube.com\/embed\/7w-UWuDi0fY?rel=0\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<h2>IRR Calculation Part 1<\/h2>\n<p><iframe loading=\"lazy\" src=\"http:\/\/www.youtube.com\/embed\/KKqzSGMz9Sk\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<h2>Part 2<br \/>\n<iframe loading=\"lazy\" src=\"http:\/\/www.youtube.com\/embed\/3jY5o0Sl2L0\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><br \/>\nInternal Rate of Return Exam Preparation &#8211; Premium Video (Free Preview)<br \/>\n<iframe loading=\"lazy\" src=\"https:\/\/www.youtube.com\/embed\/BwRFxNSreZA\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/h2>\n<h2>To Watch FULL Premium videos <span style=\"color: #0000ff;\"><a style=\"color: #0000ff;\" href=\"https:\/\/mbabullshit.com\/blog\/video-plan-170626\/\" target=\"_blank\" rel=\"noopener\">Click Here<\/a><\/span><\/h2>\n<p><strong>Download my FREE Cheat-Sheet PDF on <span style=\"color: #0000ff;\"><a style=\"color: #0000ff;\" title=\"Internal Rate of Return IRR\" href=\"https:\/\/mbabullshit.com\/blog\/wp-content\/uploads\/2013\/03\/InternalRateOfReturnIRR-CheatSheet.pdf\" target=\"_blank\" rel=\"noopener\"><span style=\"color: #000000;\">Internal Rate of Return IRR<\/span> click here<\/a><\/span><\/strong><\/p>\n<p><strong>MAIN POINTS<\/strong><\/p>\n<ul>:<\/p>\n<li>Rate of return is \u201chow fast\u201d you can get back your money after you invest it. It\u2019s expressed as a <span style=\"text-decoration: underline;\">percentage per year, forever<\/span>.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li>For example, if you invest $100 and get back $3 <span style=\"text-decoration: underline;\">per year<\/span> (forever), then your rate of return is 3% (Because $3 = 3% of $100)<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li><span style=\"text-decoration: underline;\">Internal<\/span> rate of return is the same as rate of return, except it\u2019s not so easy to figure out like in the $3 example above.\u00a0 What if you get back $3 on the first year, but another amount in other years? And what if it\u2019s <span style=\"text-decoration: underline;\">not<\/span> forever?<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li>In this case, we figure out this \u201cmystery\u201d rate of return (a.k.a. internal rate of return) using the IRR or Internal Rate of Return Formula:<br \/>\n0 = CF1(1+irr) + CF2(1+irr)<sup>-1<\/sup>\u00a0+\u2026+ CFN(1+irr)<sup>-n<\/sup><\/li>\n<\/ul>\n<p>DON\u2019T panic! It\u2019s much EASIER than it looks. Watch tutorial video below.<\/p>\n<ul>\n<li>IRR is used to gauge how \u201cprofitable\u201d a business is, taking into account the amount invested in a company or a specific project<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li>IRR can be compared to cost of borrowing money for capital (or other sources of capital).\u00a0 For example: if your company\u2019s capital comes from borrowing money from the bank at 5% interest rate, then your IRR should be higher than 5%&#8230; if your IRR is only 3%, then you are losing 2% (because 3% IRR less 5% bank interest will leave you with negative -2%)<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li>IRR can also be compared to your alternative investment choices.\u00a0 Why will\u00a0 you do a business project and earn only 3% IRR\u2026 if you can instead invest your money in a bank\u2019s fixed term deposit which earns 4%?\u00a0 You are missing an opportunity to earn an extra 1%.<\/li>\n<\/ul>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/mbabullshit.com\/blog\/wp-content\/uploads\/2013\/03\/IRR-Internal-Rate-of-Return-Infographic-e1362458360347.jpg\" alt=\"Internal Rate of Return IRR\" width=\"500\" height=\"752\" \/><\/p>\n","protected":false},"excerpt":{"rendered":"<p>See infographic and download FREE cheatsheet at bottom 3-Minute Overview IRR Calculation Part 1 Part 2 Internal Rate of Return Exam Preparation &#8211; Premium Video (Free Preview) To Watch FULL Premium videos Click Here Download my FREE Cheat-Sheet PDF on Internal Rate of Return IRR click here MAIN POINTS : Rate of return is \u201chow [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[46,158,157,45,156,154,155],"class_list":["post-148","post","type-post","status-publish","format-standard","hentry","category-free-video-tutorials","tag-internal-rate-of-return","tag-internal-rate-of-return-explained","tag-internal-rate-of-return-formula","tag-irr","tag-irr-formula","tag-what-is-internal-rate-of-return","tag-what-is-irr"],"_links":{"self":[{"href":"https:\/\/mbabull.com\/blog\/wp-json\/wp\/v2\/posts\/148","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mbabull.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mbabull.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mbabull.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mbabull.com\/blog\/wp-json\/wp\/v2\/comments?post=148"}],"version-history":[{"count":31,"href":"https:\/\/mbabull.com\/blog\/wp-json\/wp\/v2\/posts\/148\/revisions"}],"predecessor-version":[{"id":5400,"href":"https:\/\/mbabull.com\/blog\/wp-json\/wp\/v2\/posts\/148\/revisions\/5400"}],"wp:attachment":[{"href":"https:\/\/mbabull.com\/blog\/wp-json\/wp\/v2\/media?parent=148"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mbabull.com\/blog\/wp-json\/wp\/v2\/categories?post=148"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mbabull.com\/blog\/wp-json\/wp\/v2\/tags?post=148"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}