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Quickly grasp the calculation method of investment rate of return and internal rate of return

Return on investment (ROI) and internal rate of return (IRR) are two important indicators to evaluate the profitability of investment projects. This article will show you in detail how to quickly calculate these two indicators.EzbaccarattableAnd provide practical examples and tables to help you conduct investment analysis more efficiently

First, the calculation method of return on investment (ROI)

The rate of return on investment is an index to measure the relationship between investment income and investment cost.

ROI = (return on investment-cost of investment) / cost of investment

The following is a simple example of calculating return on investment:

Investment project investment cost investment income ROI project A 10Ezbaccarattable2000 yuan (2000-10000) / 10000 =-0.8

According to the calculation results, the investment return of project An is-0.8, indicating that the investment income is lower than the investment cost, and investors may lose money.

Second, the calculation method of internal rate of return (IRR)

The internal rate of return is the discount rate that makes the net present value (NPV) of the investment project zero. Calculating IRR requires the following steps:

List the cash inflows and outflows of each period of the investment project. The NPV value under each discount rate is calculated by using the net present value formula. Find the discount rate that makes NPV equal to zero, that is, IRR.

The following is an example of an internal rate of return calculation:

Year cash inflow cash outflow 0-20000 yuan 20000 yuan 1 5000 yuan 0 yuan 2 10000 yuan 0 yuan

By trying different discount rates, we find that when the discount rate is 15%, NPV is close to zero. As a result, the internal rate of return for the project is about 15%.

III. A method for quickly calculating the rate of return on investment and internal rate of return

To facilitate quick calculation of ROI and IRR, you can use professional financial software or an online calculator. These tools can help you complete your calculations more efficiently and save time.

In a word, it is very important for investors to understand the calculation method of investment rate of return and internal rate of return. By mastering these two indicators, you can better evaluate the profitability of investment projects and make wise investment decisions.

ezbaccarattable| Methods and steps to quickly calculate return on investment and internal rate of return