The Internal Rate of Return

Published on November 2016 | Categories: Documents | Downloads: 38 | Comments: 0 | Views: 307
of 1
Download PDF   Embed   Report

Comments

Content

The Internal Rate of Return (IRR) within the Ode investment is 17.22%. From this analysis can now acknowledge a cut-off for deciding which projects to decide on. If the cost of capital is above the hurdle rate of 17.22%, Ode Ltd will recognise the project is unlikely to provide a return for the business, therefore may decide to invest another project. As with NPV, IRR recognises all relevant cash flows and the time value of money. However, IRR does not address the question of wealth generation and the scale of investment, these factors may influence organisations like Ode Ltd to make the wrong capital investment decision. The calculation of the IRR may also be time consuming as it involves trial and error; as it involves predicting the cost of capital which may provide a negative NPV if the project currently has a positive NPV and vice versa.

Sponsor Documents

Or use your account on DocShare.tips

Hide

Forgot your password?

Or register your new account on DocShare.tips

Hide

Lost your password? Please enter your email address. You will receive a link to create a new password.

Back to log-in

Close