Hello, I can't thank you enough for the great support and detailed explanation. I've been trying to understand it for hours, until I saw your publication. Cheers!
We need more videos like this. The uni lecturers cover too much content within just 2 hours and the weekly tutorial tutors are not good quality teachers. We get confused about the lecture materials all the time but no one gives clear explanations. Thank you for doing this for us and well done!!
r = 1/10 (sqrt(69) - 7) = 0.130662 = 13.0662% Simplify the equation: The term (1+r)^0 equals 1 because any number raised to the power of 0 is 1. So, the equation simplifies to -100 + 60/(1+r) + 60/(1+r)^2 = 0. Combine like terms: To make the equation easier to solve, we combine the terms over a common denominator, which in this case is (1+r)^2, leading to -100*(1+r)^2 + 60*(1+r) + 60 = 0. Expand and simplify: We then expand the equation to get rid of the parentheses and combine like terms: -100*(1 + 2r + r^2) + 60 + 60r = 0, which simplifies to -100 - 200r - 100r^2 + 60 + 60r = 0, and further simplifies to -100r^2 - 140r - 40 = 0. Solve the quadratic equation: This is a quadratic equation in the form ar^2 + br + c = 0, where a = -100, b = -140, and c = -40. We use the quadratic formula to solve for r: r = (-b ± sqrt(b^2 - 4ac))/(2a), substituting the values of a, b, and c, we get: r = (140 ± sqrt((-140)^2 - 4*(-100)*(-40)))/(-200). Calculate the solutions: We calculate the discriminant sqrt((-140)^2 - 4*(-100)*(-40)) and then find the two values for r by adding and subtracting the square root of the discriminant from -b and dividing by 2a. Wolfram Alpha confirms the solutions to the equation as: r = 1/10 (-7 - sqrt(69)) r = 1/10 (sqrt(69) - 7) = 0.130662 = 13.0662%
Outstanding videos. Your teaching style is amazingly thorough yet clear, concise, and articulate. I wish all professors taught the way you do. Thank you again
thanks a million , much appreciated !! you are doing an amazing job , i'm a finance student from algeria and my professors suck big time they only give us the formulas without really explaining them .. your videos are extremely helpful
man I'm a mechanical engineering student but I had to take this business subject , I was really suffering with this topic,,, but thanks to your video , you made it so much easier for me to get it, thank you so much , it really helped me out !
Good luck in your exam tomorrow, Neo! There's actually a formula to 'approximate' it instead of guessing, but I don't recommend it coz it only works in "uniform" situations where the cash flow is consistent... cheers!
@Serkan the very simple quadratic root equation will not work if the cashflows are different every year, it only works under uniform consistent cashflows
I was wondering what this IRR even though i could calculate using excel sheet, but this video along with the previous one explains IRR in practical term.Thank you.
Great video, thank you. You can solve the equation quadratically. Pretend 1+r is x, and solve for x. You will get 2 solutions. one is impractical as a negative rate, and the other is the correct one. In this example, the solutions are 1.13 and 0.53. remember those are still 1+r. so solving for r will yield -0.47 and 0.13 (-47% and 13%). The correct answer is obviously +13%. Else, use excel's formula for IRR.
Highly advice using a calculator with functions for cash flow and irr. Took me about 4 seconds to find the answer. Thanks for the video anyway, was really wondering why it was called INTERNAL!
Thank you so much :-) im really having hard time analyzing how to calculate IRR but because of ths i understand nw. Ths s really a big help to my report .
@choddopice Hi, as of now, nope, sorry. Maybe in the future, yet. I'm actually very good at explaining sensitivity analysis, but I don't have time right now. The videos look simple to make but they actually take a VERY long time to think of how to explain them in a simple way. Cheers.
You didn't miss out... I really just guestimated it. You can use an approximation formula if you want, but I don't recommend it coz it only works if the cashflows are consistently the same; you'll get lost if they are different.
your explainations are always great.. I hate accounts but it feels nice n easy to learn from your videos... I want to ask u one fing. in the rest of the vids or on net, I have seen only you putting the negative signs in the years on the PV formula... does it make any difference? thank you so much... :)
Can you tell me how you got -1.2 (Third row of calculation @09:32) I know you calculated the line above but I am getting a different figure to you. Likewise for 1.4 and 0.09 later on in the video Can you do a step by step in the comments please :) Thanks
Its a long one, for me.. Here's. Just find NPV of cash flow. One from positive amount and one from negative amount. With high difference in hitting IRR%. Then again Interpolate the values. IRR= LR + [NPV(LR)/NPV (LR)- NPV (HR) { look here the npv from HR was negative. It will add to the npv lr} ] ×(HR - LR) and you get the little or more difference in answer. But take that value of irr say 25%. Just go little down to 22% for LR and go 27 for HR. And find NPV at those values. And do it again. You will get. 99% correct answer. (Problem with this was the direction. We dont know where to check irr. Get the direction first. Then you will catchup speed). If the cost is given. Take the reference from it. And see how much you have to decrease from it to get near the zero value.
Excellent explanation! Although, my calculator does most of the calculations but this helped me to understand the underlining process. I am looking forward to watching how you calculate the NPV with a formula. I am struggling a bit with what formula to use in order to compare two lease agreements. Do you have anything that I can look at for this? Maybe I can email you the questions containing Lease A and Lease B details?
Thanks for all of your videos, they are the best around because even I can understand them (and I haven't done this kind of maths since I left school which was over 30 years ago!)!!! Can you explain how you reached the answer "-1.2=0" when r=14% (i.e. Can you break down the calculation because i can't get to that number please?) Thank so much!
@tazer1989 Hey Tazer. Putting negative sign in an exponent is just a shortcut to the conventional way where they put the positive exponent in a denominator. So the only difference is that it's faster. Cheers!
This is super easy and useful, but unfortunately not the formula/equation my professor's asking for. Still, THANK YOU, for other videos, you're superb!
The video is really helpful but the shorter the video, the more attractive it would be. There are times that you give too much explanation like obviously, zero is not equal to 1.2 and the algebra thing. Anyway, your topic is great :) I'm sure I'm gonna need it in my course.
Unfortunately it did not work out for my calculation given by the professor. Is there any difference if it is not an investment but a loan?! We have to calculate it with fluctuating interests; so does the IRR fluctuate as well?
I wish my professors would explain these concepts like this. I agree that you have to guess and check to find the rate. Very time consuming especially during an exam. And when not aloud to use electronic devices that do it for you (Like what every professional does).
Hi ! First of all I want to thank you for your videos, and also for answering to our questions. Regarding this video, maybe this is my course which is confusing me but : Is the Yield to Maturity and the Internal Rate of Return the same thing? ( I think is what my professor said) Thank you very much
