The Excel is a very powerful tool which every entrepreneur must use for the evaluation and the feasibility of the projects. In today’s post, I will discuss the Internal Rate of Return or in the short form, the IRR. **The Internal Rate of Return is the rate of return which makes the Net Present Value of all the cash flows from a project or an investment to zero.**
It is generally used to measure the attractiveness of the investment or the project. Let me suppose you invest in any of the projects of your field or choice. How do you know that it is a profitable project and will give you the higher return than the cost of capital?The IRR is one such tool which lets you know the internal rate of return of your project. It deals with the periodic cash flows. If **When I****RR > cost of the capital or the hurdle rate**
(The project is feasible)**When IRR < cost of the capital or the hurdle rate**
(The project is not feasible) |
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June 2019
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