Join Yash Patel for an in-depth discussion in this video Real talk: IRR and payback period, part of Investment Evaluation.
- Hey everyone and welcome back.…I'm here with Kevin, president and CEO…of Meet Kevin and Meet Don and this time, Kevin,…we're talking about IRR, the internal rate of return.…Now Kevin, when do you use internal rate of return…metrics in your business?…- Any time the discount rate isn't known…or there isn't a consensus within the company or a family…in that, in this case, we'll use IRR.…- So what do you mean by that, there isn't a consensus?…Why wouldn't there be a consensus?…- You know, different people measure…the discount rate in different ways.…Some people look at it as what is our cost of debt,…what opportunity do we have in the marketplace…to get a certain yield, so it can be very variable.…
- Okay and so what happens?…You calculate the IRR and then what do you do with it?…- Well the IRR is wonderful because you can use it…to sort of compare different investment options and choices.…- Okay Kevin, so imagine that you do…have a couple of investments…and one is a really short-term investment with a high IRR…
- Investment types
- Present, future, and terminal values
- Opportunity cost
- Calculating DCF
- Calculating NPV
- Calculating IRR
- Calculating the payback period
Skill Level Intermediate
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2. Discounted Cash Flow (DCF)
3. Net Present Value (NPV)
4. Internal Rate of Return (IRR)
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