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ERIC Number: EJ787816
Record Type: Journal
Publication Date: 2008
Pages: 10
Abstractor: Author
Reference Count: 3
ISSN: ISSN-0022-0485
What Does an IRR (or Two) Mean?
Johnstone, David
Journal of Economic Education, v39 n1 p78-87 Win 2008
Defined mathematically, the internal rate of return (IRR) of a cash-flow stream is the discount rate at which its net present value is 0. What is the significance or meaning of such a measure? Using simple example problems and illustrative calculations, the author explains a technically correct but, at the same time, intuitively meaningful interpretation of IRR. The mathematical insights gained include a clear understanding of how multiple IRRs occur and of how investment decisions based on net present value are reconcilable with two or more observed IRRs. (Contains 5 tables and 3 figures.)
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Publication Type: Journal Articles; Reports - Descriptive
Education Level: N/A
Audience: N/A
Language: English
Sponsor: N/A
Authoring Institution: N/A