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# 1 Practical use of the IRR worksheet

You are making a business loan of $50,000.  The pay back schedule is as follows:

End of year 1

 

$12,000

End of year 2

 

$13,000

End of year 3

 

$15,000

End of year 4

 

$8,000

End of year 5

 

$21,000

The following is a pictorial on the easy way to calculate the IRR:

Step 1

 
Step 2

 
Step 3

 
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# 2 Real Estate Example

You purchase an apartment complex with $200,000 as your down payment.  After you figure your financing, you have end of year cash flows as follows.  You also sell the property at the end of the 5th year and have proceeds of sale of $320,000.  

End of year 1

 

$14,000

End of year 2

 

$16,000

End of year 3

 

$20,000

End of year 4

 

$18,000

End of year 5

 

$320,000

The following is a pictorial on the easy way to calculate the IRR:

Step 1

 
Step 2

 
Step 3

 

Internal Rate of Return Worksheet

HOW TO USE THIS FORM - Example #1

Example #2 - Real Estate Example

DEFINITION OF IRR:
That rate that discounts all future cash flows to equal the initial investment.
The primary use of IRR is for investments with uneven cash flows.
(1) Input: Initial Investment (2) Up to 30 annual cash flows




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