Initial Loan Amount-850000
Maturity Amt- 1000000
period - 3 Years.
How to Calculate IRR in this Case?
please explain the process.
IRR shall be calculated by taking two different discount factors on investment say 5% and 4% then after taking the required yield on investment means the interest rate say on (850000 @ 10% interest) and at last year maturity amount shall be multiplied with the discount factor, you have to calculate PV of the investments by multiplying the interest and the maturity amount for 3 years with the discount factors of both 5% and 4% , then the present value of the investment shall be calculated and from that PV, NPV shall be arrived after deducting the total Initial investment from the total PV calculated.
Formula of IRR is
lower rate means 4% + NPV at lower rate means at 4%/ NPV at lower rate - NPV at higher rate (5%) * Difference in rate means (5%-4%)
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