Rate of return


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Querist : Anonymous

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Querist : Anonymous (Querist)
17 December 2012 Dear Experts,

If i invest in a scheme, where i have to give money Rs. 150000 for first five years & then i get Rs. 27,94000 then how much rate of return ??? In % ok.

Plz guide as early as possible...

Thanks in advance..

18 December 2012 Cash Flows 1/(1+r)^n DC DCF
150000 1/(1+0476105)^1 0.677458582 101618.79
150000 1/(1+0476105)^2 0.45895013 68842.52
150000 1/(1+0476105)^3 0.310919704 46637.96
150000 1/(1+0476105)^4 0.210635222 31595.28
150000 1/(1+0476105)^5 0.142696639 21404.50
-2794000 1/(1+0476105)^6 0.096671063 -270098.95
Total Cf 0.09

IRR 47.6105%


18 December 2012 IRR is the Internal rate of return, which is to be derived by interpolation of the guess rate. Suppose u feel that IRR will be somewhere around 30%. Try doing calculation by taking that rate as Discounting Rate. If DCF inflows > DCf Outflow. The higher rate is to be taken, which means that interest rates are higher.



Cash Flows 1/(1+r)^n DC DCF
150000 1/(1+0.30)^1 0.769230769 115384.62
150000 1/(1+0.30)^2 0.591715976 88757.40
150000 1/(1+0.30)^3 0.455166136 68274.92
150000 1/(1+0.30)^4 0.350127797 52519.17
150000 1/(1+0.30)^5 0.269329074 40399.36
-2794000 1/(1+0.30)^6 0.207176211 -578850.33
Total Cf -213514.87

IRR >< 50.0000%

It means discount rate will be somewhere between 30% - 50 %

I hope this will help u.


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