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# Define internal rate of return?

###### Wiki User

###### September 22, 2009 8:05AM

Money deposited in an interest bearing account has a rate of

return. the institution will take that money and reinvest it so

they can make money off of it as well.

This rate of return on the internal investment is the internal rate

of return, which is usually higher than that paid to the original

investor.

## Related Questions

###### Asked in Business Finance

### What are the differences between accounting rate of return and internal rate of return?

Internal rate of return (IRR) is a discounted method used for
Capital budgeting decisions (investment etc) while accounting rate
of retun is a measure for calculating return for a one off payment.
IRR is actually the discount rate that equates the Present value of
the cash flows to the NPV of the project (investment) while
accounting rate of return just gives the actual rate of return.
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###### Asked in Microsoft Excel

### How do you use excel function for Modified Internal Rate of Return?

The MIRR function returns the modified internal rate of return
for a series of cash flows. The internal rate of return is
calculated by using both the cost of the investment and the
interest received by reinvesting the cash. The cash flows must
occur at regular intervals, but do not have to be the same amounts
for each interval.
MIRR(range,finance_rate,reinvestment_rate)
range = range of cells that represent the series of cash
flows
finance_rate = interest rate that you pay on the cash
flow amounts
reinvestment_rate = interest rate that you receive on the
cash flow amounts as they are reinvested