From the course: Financial Modeling Foundations

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IRR decisions in financial models

IRR decisions in financial models - Microsoft Excel Tutorial

From the course: Financial Modeling Foundations

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IRR decisions in financial models

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- [Narrator] Making decisions in business is the ultimate goal of a financial model. There's no point in a model if it doesn't lead to better decision making by the firm, right? To make those decisions, business professionals often turn to IRR's or Internal Rates of Return, which are derived from financial models and the projections they produce. Now, we're at the bottom of the sheet, where we ultimately have the level of cash that is going to be paid out to investors. And as row 136 shows us, is that, initially, in 2017, we invest 86,254,000 dollars in this particular firm, in buying out for LBO. Every year after that, we begin to pay ourselves small dividends that ramp up over time, so in 2018, we pay ourselves a 300,000 dollar dividend, 2019, it's a 400,000, and then a 500,000, and finally, a 600,000 dollar dividend. In 2022, after we've improved the firm, we're ready to turn around and sell the company. Now, we project, based on all the financial modeling that we have done above…

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