The rate of return that would make the present value of future cash flows plus the final market value of an investment or business opportunity equal the current market price of the investment or opportunity; in other words, the rate of return at which the net present value of the project is zero. If the internal rate of return exceeds the cost of financing the project, then the project is viable. The internal rate of return is also useful in ranking competing investment projects (the higher the internal rate of return, the better the project is), but there are some limitations with this technique. First, if cash flows change from negative or positive, or vice versa, a unique internal rate of return cannot be calculated, Second, in the case that competing projects are being considered, the internal rate of return criteria sometimes gives a different ranking than the net present value criteria. Thus, net present value is usually preferred over internal rate of return, since net present value is a specific number and is usually easier to calculate. also called dollar-weighted rate of return.
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A measure of the rate of return for an asset or portfolio of assets. It is calculated by finding the rate of return that will set the present values of all cash flows and ...
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is called the dollar weighted rate of return, which is i = FV − V0 − ∑n j=1 Cj. V0t + ∑ n j=1(t − tj )Cj . (2). V0 can be interpreted as the initial balance in an account.
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Dollar-weighted Rate of Return. No definition for this category. No definition for this category. The interest rate that will make the present value of the cash flows ...
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