Question 1: What is the internal rate of return (IRR)? What are its economic implications? The English name of internal rate of return: internal rate of return, IRR refers to: the sum of the discounted present values ??of the cash flows of the investment project in each year is the net present value of the project, and the discount rate when the net present value is zero is the internal rate of return of the project < /p>

The internal rate of return is the income when the present value of the cash flow generated by an investment in the future is exactly equal to the investment cost, taking into account the time value, rather than what you think "regardless of whether it is high or low" The net present value is zero, so it doesn’t matter whether it’s high or low.” This is putting the cart before the horse. Because the premise of calculating the internal rate of return is to make the net present value equal to zero. To put it simply, the higher the internal rate of return, it means that the cost you invest is relatively small, but the benefits you get are relatively large. For example, the investment costs of A and B are both RMB 100,000 and the operating period is 5 years. A can earn a net cash flow of RMB 30,000 per year and B can earn RMB 40,000. Through calculation, it can be concluded that A's internal rate of return is approximately equal to 15%, B's is approximately equal to 28%, these can actually be seen through the annuity present value coefficient table.

Question 2: What is internal rate of return? You are asking about financial management. I would like to share my personal understanding.

Internal rate of return, first of all, you need to know what "internal" is. There is an assumption that it relies on its own funds to obtain returns and excludes external financing. It is a measure of the development level of an enterprise's own economic strength.

In many understandings, it is said to be the discount rate. It is indeed difficult to understand this concept. The simplest way to come to this conclusion is to do it in two steps.

The first step is that the internal rate of return is your benchmark rate of return. The key to whether you use a fund is whether the expected rate of return of the fund is higher than your benchmark rate of return. (No less, to be exact).

The second step is to discount the total income (or the sum of principal and interest) obtained from the funds used. The discount rate is your base rate of return to obtain the discounted value and the present value of the funds you hold. Compare.

(Obtain the discounted value - the present value of the funds you hold) / stare at the present value of the funds you hold = internal rate of return.

From this point of view, the higher the internal rate of return, the better.

Question 3: What is the economic meaning of cash flow internal rate of return? Internal Rate of Return (IRR) is the discount rate when the total present value of capital inflows is equal to the total present value of capital outflows and the net present value is equal to zero. If you do not use a computer, the internal rate of return needs to be calculated using several discount rates until you find the discount rate at which the net present value is equal to zero or close to zero. The internal rate of return is the rate of return that an investment aspires to achieve, and it is the discount rate that can make the net present value of the investment project equal to zero.

It is the rate of return that an investment aspires to achieve. The bigger the indicator, the better. Generally speaking, the project is feasible when the internal rate of return is greater than or equal to the benchmark rate of return. The sum of the discounted present values ??of the cash flows of the investment project in each year is the net present value of the project. The discount rate when the net present value is zero is the internal rate of return of the project. In project economic evaluation, depending on the level of analysis, the internal rate of return can be divided into financial internal rate of return (FIRR) and economic internal rate of return (EIRR).

At present, investment methods such as stocks, funds, gold, real estate, and futures have been familiar and used by many financial managers. However, many people's understanding of the effectiveness of investment is limited to the absolute amount of income, lacking scientific basis for judgment. For them, the internal rate of return (IRR) indicator is an indispensable tool.

Question 4: The concept of internal rate of return (IRR) Internal rate of return (Internal rate of return) financial internal rate of return method (FIRR), internal rate of return method, internal rate of return.

The internal rate of return method is a method that uses the internal rate of return to evaluate the financial benefits of project investment. The so-called internal rate of return is the discount rate when the total present value of capital inflows is equal to the total present value of capital outflows and the net present value is equal to zero.

The formula of the internal rate of return method

(1) Calculate the annuity present value coefficient (p/A, FIRR, n) = K/R;

( 2) Check the annuity present value coefficient table and find the two coefficients (p/A, i1, n) and (p/A, i2, n) adjacent to the above annuity present value coefficient and the corresponding i1 and i2, satisfying ( p／A, il, n) >K／R>(p／A, i2, n);

(3) Use interpolation method to calculate FIRR:

(FIRR-I )/(i1―i2)=[K／R-(p/A,i1,n)]/[(p／A,i2,n)―(p／A,il,n)]

< p> If the cash flow of the construction project is a general cash flow, the calculation process of the financial internal rate of return is:

1. First, determine an initial discount rate ic based on experience.

2. Calculate the financial net present value FNpV(i0) based on the cash flow of the investment plan.

3. If FNpV(io)=0, then FIRR=io;

If FNpV(io)>0, continue to increase io;

If FNpV(io)0, FNpV (i2)>

Question 5: What is the financial internal rate of return? The internal rate of return is a basic indicator that reflects the economic effect of a project. It refers to the discount rate when the cumulative present value of net cash flows in each year equals zero during the construction and production service period of the investment project.

This analysis method takes into account the time-based value of currency and can measure the profitability of each plan. Therefore, it is one of the important methods for investment forecast analysis.

The calculation formula is omitted.

When manually calculating, several discount rates should be used for trial calculation until the discount rate when the net value is equal to 0 or close to 0 is found. When doing trial calculations, the lowest efficiency rate is generally used as the discount rate in the calculation formula. If the net present value is positive, try a higher discount rate and then calculate again. If it is a negative value, use a lower discount rate to recalculate. .

The EXCEL table has a function "IRR" that automatically calculates the internal rate of return.

Question 6: Misunderstandings in the use of the internal rate of return indicator in the analysis of the reasons for the internal rate of return. The internal rate of return indicator is correct when evaluating a single plan. In the comparison of multiple plans, if the results of two or more plans are directly compared Comparing the internal rate of return and believing that a plan with a large internal rate of return is better than a plan with a small internal rate of return may lead to wrong results. If this approach is adopted, it will actually lead to a misunderstanding of the use of internal rate of return. However, many people mistakenly use the internal rate of return indicator in practical applications and research. What is the reason? The reason for the error is that the incorrect use of the internal rate of return indicator is mainly due to a lack of understanding of the inherent meaning of the internal rate of return. The internal rate of return is the discount rate that causes the net present value to be zero. Its basic expression is: NPV - net present value; CIt - cash inflow in year t. In the formula: COt - cash outflow in year t; IRR - internal rate of return; n - project life span. For a single project, the evaluation of the internal rate of return is correct, and the judgment standard is: assuming i0 as the benchmark discount rate, when IRR ≥ i0, the project is economically acceptable; when IRRIRR is the intersection of the NPV curve and the abscissa the corresponding discount rate. As the discount rate continues to increase, the net present value continues to decrease until the net present value reaches zero when the discount rate is equal to the IRR. That is to say, when the base discount rate is less than the IRR, the net present value is positive and the project plan is feasible. When the base discount rate is greater than the IRR, the net present value is negative and the project plan is unfeasible. It can be seen from the basic expression of IRR and Figure 1: The calculation of IRR does not need to know the base discount rate of the project, that is, it does not need to consider the market interest rate and some uncertain factors that change over time. This is its advantage. Therefore, There are many people who use the internal rate of return indicator. However, if the connotation of internal rate of return is not clearly understood, they will fall into the misunderstanding of using internal rate of return, that is, directly comparing the advantages and disadvantages of multiple plans based on the internal rate of return. Although the internal rate of return can accurately reflect the possible trend of the actual profitability of the project, it cannot reflect the real data of the actual rate of return of the project. Therefore, the internal rate of return can only be used to evaluate the economics of a single project, and the IRR of two or more projects cannot be directly compared. Improper Use and Reasons in Determining the Benchmark Discount Rate The benchmark discount rate is the link that connects the funds of different periods in the enterprise's project decision-making. It makes the expenses and benefits in different periods comparable, and is fully effective from a dynamic perspective. Reflects the time value of money. In the era of planned economy, the benchmark discount rate was officially calculated and published by relevant national departments and industries, and was used to evaluate state-owned investment projects. For the various forms of investment projects now, it does not have much value. The main reason is that each project has different requirements for investment return. Nowadays, the benchmark discount rate is mostly determined by the investment companies or industries themselves. Therefore, once the enterprise's benchmark discount rate is determined unreasonably, it will have a great impact on the profitability of the entire enterprise. The factors that determine the benchmark discount rate are also relatively complex. For a single project, the size of the benchmark discount rate mainly depends on the structure of the source of funds (loan funds, new equity capital, corporate reinvestment funds, etc.) and the cost of various funds. , and the project risks and inflation factors that affect investment must be taken into account. For the entire enterprise or industry, starting from the overall goal, there is another point of view, that is, the cut-off rate of return determined from the perspective of capital demand and supply is used as the benchmark discount rate for the enterprise or industry. This method is based on the following assumptions: 1. The enterprise makes decisions based on the overall goal to maximize the entire net investment income of the enterprise. 2. The enterprise clearly understands all investment opportunities, can correctly estimate the internal rate of return of all selected investment projects, and adjust the rate of return of different projects to the same risk level. 3. Enterprises can raise sufficient funds through various channels and can correctly estimate the cost of funds from different sources. At the same time, it is believed that in an economic entity, as the scale of investment expands, the cost of financing will become higher and higher.

When there are many investment opportunities, if the funds raised are prioritized for projects with high yields, then as the investment scale expands, the yields on new investment projects will become lower and lower. When the income from new investment can only compensate for its capital cost, the expansion of investment scale should stop. The rate of return at this time is the cut-off rate of return, which is the target rate of return obtained by the enterprise based on the overall goal.

Question 7: What is the relationship between annualized rate of return and internal rate of return? Is there any difference? Depends on where you use this thing. From a digital perspective, they can be treated as the same.

Question 8: What do the capital return rate and the investor’s internal rate of return mean? The initial outflow of total investment is the entire investment amount, regardless of the source of funds. Cash outflows during the operating period do not take into account financial expenses and are deemed to have no loans. Mainly used to evaluate the feasibility of the project; Capital cash flow statement, the initial investment is capital, the cash outflow during the operating period must consider the capital outflow for repayment of principal and interest, and when calculating income tax, because the former does not consider financial expenses, income tax outflow greater than the latter. Capital cash flow is mainly used to judge the feasibility of financing and shareholder return on investment. As for the calculation of internal rate of return, the interpolation method is mainly used.

IRR=R1+（R2-R1）*|The cumulative number of the previous period when the cumulative cash flow is zero|/The net cash flow of the current period