## Re:Algorithm for IRR

In article <55qqb2$...@news.corpcomm.net>,

##### Quote

Glenn Grotzinger <ggr...@internetland.net> wrote:

(about a TP users question)

:Why do you want IRR for projects? NPV (net present value) is proven

:to be a much better measure.....

I am pleased to see that you have read your capital investment

textbooks well. Under the strict theory of finance what you say is

certainly true. That holds in the cases of mutually exlusive

projects, under capital rationing, under non-conventional net cash

flow (more than one change of sign), project of different order of

size or under a few other circumstances. Otherwise the two methods

will agree. The operational advantage of IRR over ARR is

intuitiveness, since it is a relative measure of profitability easy

to compare e.g. with (the rate of) the cost capital while NPV is in

absolute terms. Capital and financial intestments, however, are not

the only (even if by far the most usual) targets for NPV / IRR

calculations. (See the latter, academic reference, with source

code).

:But anyway, IRR is the discount rate at which the NPV of a project is :0.

:Take it from there...

303778 May 2 1991 ftp://garbo.uwasa.fi/pc/turbopas/nrpas13.zip

nrpas13.zip Numerical Recipes Pascal shareware version, 303K!

23492 Apr 21 1996 ftp://garbo.uwasa.fi/pc/research/simirr11.zip

simirr11.zip Deriving IRR from ARR: A Simulation Testbench, TS+IV

All the best, Timo

....................................................................

Prof. Timo Salmi Co-moderator of news:comp.archives.msdos.announce

Moderating at ftp:// & http://garbo.uwasa.fi archives 193.166.120.5

Department of Accounting and Business Finance ; University of Vaasa

mailto:t...@uwasa.fi <URL:http://uwasa.fi/~ts> ; FIN-65101, Finland