From the course: Investment Evaluation

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Real talk: IRR and payback period

Real talk: IRR and payback period - Microsoft Excel Tutorial

From the course: Investment Evaluation

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Real talk: IRR and payback period

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- Hey everyone and welcome back. I'm here with Kevin, president and CEO of Meet Kevin and Meet Don and this time, Kevin, we're talking about IRR, the internal rate of return. Now Kevin, when do you use internal rate of return metrics in your business? - Any time the discount rate isn't known or there isn't a consensus within the company or a family in that, in this case, we'll use IRR. - So what do you mean by that, there isn't a consensus? Why wouldn't there be a consensus? - You know, different people measure the discount rate in different ways. Some people look at it as what is our cost of debt, what opportunity do we have in the marketplace to get a certain yield, so it can be very variable. - Okay and so what happens? You calculate the IRR and then what do you do with it? - Well the IRR is wonderful because you can use it to sort of compare different investment options and choices. - Okay Kevin, so imagine that you do have a couple of investments and one is a really short-term…

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