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Please Help, What is a simplified way to compute IRR if a ...

Resolved Question:

Please Help, What is a simplified way to compute IRR if a projected return is $17,000 3 years from now if the initial cost was only 12,000?
Submitted: 6 years ago.
Category: Finance
Expert:  Scott replied 6 years ago.
Welcome!

The IRR is basically the percentage rate of increase per year.

The formula for this is:

P = A(1 + r)^t, and we need to solve for r, where P is the amount at the end of t years, starting with A.

Plug in what we have:
17000 = 12000(1+r)^3
Divide by 12000:
(1+r)^3 = 17/12
Take the cube root:
1+r = cuberoot(17/12)
Subtract 1:
r = cuberoot(17/12) - 1
r = 0.12311
r = 12.311%

Let me know if you have any questions. If not, thanks for pressing "Accept".

-Scott
Scott, MIT Graduate
Category: Finance
Satisfied Customers: 17710
Experience: I manage my own money -- stocks, bonds, 401k, etc.
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