Investment now = £60,000.
Cash return at the end of year 10 = £120,000.
Calculate the Internal Rate of Return
Investment now = £60,000.
Cash return at the end of year 10 = £120,000.
Calculate the Internal Rate of Return
Solve for r.
Oooo!
How do I do that!
4 steps...
- Divide both sides by 60K
- Take the 10th root of both sides (you'll need a calculator which handles fractional roots, or Excel, or something similar)
- That leaves you with (1 + r) on the RHS, so deduct "1" from both sides
- Call it a day
Alternatively, just keep hitting the right-hand side of my initial equation with different values for r, trial-and-error style, until the result is close enough to 120K.
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