In this lesson, delve into the ins and outs of the Internal Rate of Return (IRR) as Nick Palazzolo, CPA, unpacks this fundamental concept in the world of finance. Discover the subtleties of IRR, including its definition as the discount rate that brings the net present value to zero, and what that means for making investment decisions. With a blend of practical examples and relatable analogies, Nick illustrates the nuances between net present value and the percentage-based IRR, and how they serve as tools for different decision-making scenarios. Engage in a detailed discussion on when to opt for IRR over other valuation methods, and follow Nick as he walks through an example comparing projects to determine the most advantageous based on their IRR and net present value, all while keeping in mind the concept of mutually exclusive projects versus independent ones.
Lesson: Internal Rate of Return - Closer Look
In this lesson, delve into the ins and outs of the Internal Rate of Return (IRR) as Nick Palazzolo, CPA, unpacks this fundamental concept in the world of finance. Discover the subtleties of IRR, including its definition as the discount rate that brings the net present value to zero, and what that means for making investment decisions. With a blend of practical examples and relatable analogies, Nick illustrates the nuances between net present value and the percentage-based IRR, and how they serve as tools for different decision-making scenarios. Engage in a detailed discussion on when to opt for IRR over other valuation methods, and follow Nick as he walks through an example comparing projects to determine the most advantageous based on their IRR and net present value, all while keeping in mind the concept of mutually exclusive projects versus independent ones.
Updated: May 31, 2022 Create an account