Management Accounting
This query is : Resolved
suresh ananthuni
(Querist)
02 August 2010
IS Internal Rate of Return calculated on pre tax cash flows or post tax cash flows?
CMA Ramesh Krishnan
(Expert)
02 August 2010
it is on post tax cash flows
suresh ananthuni
(Querist)
02 August 2010
any other opinion
02 August 2010
IRR is the rate at which npv = 0
NPV is calculated on after tax cash flows
so IRR is calc on post tax cash flows
NPV is calculated on after tax cash flows
so IRR is calc on post tax cash flows
VINOD ARORA
(Expert)
02 August 2010
IRR is supposed to 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. So obviously we should consider tax effect, otherwise IRR may be misleading or of limited use!!
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