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Rob's 2000 Notes

✏️ More IRR Examples

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Whenever you see an IRR problem, you will ALWAYS write down the following formula and then substitute numbers into it:

PV of Cash Inflows=PV of Cash Outflows\text{PV of Cash Inflows} = \text{PV of Cash Outflows}

I will often abbreviate this as:

PVInflows=PVOutflows\text{PVInflows} = \text{PVOutflows}

(Some students will write down NPV=0 instead of PV(Inflows)=PV(Outflows), but this can make the algebra harder when we do bonds.)

KEY FACT: There are only a small number of types of IRR questions that he can ask. I’ve included most of them on the following page: PDV and IRR (With Examples). Therefore, if you can master the examples on that page, you are in great shape. Try doing the examples on that page independently. Once it starts feeling repetitive, that’s great!