"Learn How To Find ROI On That Investment You Are About To Make. Wise Investors Analyze Data Before Making A Plunge Into Deep Waters."

Discounted cash flow methods enable us to capture differences in the timing of cash flows for various projects through the discounting process. In addition, through our choices of discount rate, we can also account for project risk. One of the discounted cash flow methods is the Internal Rate of Return (IRR).

The Internal Rate of Return (IRR) for an investment proposal is the discount rate that equates the present value of the expected net cash flows (CFs) with the initial cash outflow (ICO). If the initial cash outflow or cost occurs at time t0, it is represented by that rate, IRR, such that

Remember, the actual rate of return on an investment is one which results in an NPV of 0

An investment with an initial cash out flow of $50,000 pays back $15,000 per year for the next four years. Find the IRR

We use linear interpolation to estimate the actual rates of return for the four investment alternatives. Linear interpolation is a trial and error method of estimating actual rates of return when such rates are different from tables or calculators. If we start off with a rate of return of 8%, then present value of cash inflows is $49,681 and NPV is $-318.20.

As the actual rate of return is one where NPV is 0, we try to look for a rate lower than 8%, thus we choose 7% which produces present value of cash flows of $50,808.15 and NPV of $808.15. Thus the actual rate of return is somewhere between 7% and 8%.

Tom H. was offered an opportunity to investment in a stock portfolio, Tom recalls from his Financial Management course he took while at University of Tennessee at Knoxville, that he could use financial metrics such as Internal Rate of Return to find the viability of this investment. His broker had provided him with figures such as expected cash inflows and the hurdle rate. Now its up to Tom to decide how to go about this investment, either to accept it or to reject it and invest his money else where.

Tom could either grab a bunch of paper sheets and a pencil and start to wild guess the Internal Rate of Return. This could take time as using Linear Interpolation with paper and pencil could literally take from few minutes to up to an hour depending on the calculation. I doubt if Tom has such time to spare.

Tom could always go online and purchase that Texas Instrument BA II Plus Financial Calculator, or poke the data into a spreadsheet program like MS Excel, Google Docs, or 
Lotus 123 but Tom will get a surprise of his life time when he finds that TI BA II Plus reports Error 7 while finding IRR when the cash inflows changed signs, he faced similar hurdle when MS Excel reported #NUM error for the same cash inflows with mixed signs.

Paralyzed By Financial Stump

Tom was in need of a tool that could help him value this investment proposal, searching on Google search engine, Tom landed on this site. Since then Tom threw away his TI BA II Plus and now uses MS Excel to maintain his budget and uses FinEasy for number crunching. 

You don't have to take my word for it, let's illustrate this process in MS Excel and see for yourself what I mean. 

Say Tom was offered a series of cash inflows for the next four years $5000, -$4000, -$3000 and $1000 and cost of the project was $10,000

MS Excel results are illustrated below as you see a #NUM error for IRR

With FinEasy ROI Tool , Tom got his rate of return of -74.20% as illustrated in the snapshot below

As it turned out, Tom was pleased to see results when leading calculators such as TI BA II Plus and MS Excel reported error thus Tom learned about how to make wise investment decisions with FinEasy. 

FinEasy At The Price of Bagel And a Cup of Coffee

You must be thinking I charge a high price for such a neat gadget, well, the good news is that I decided to place a price much lower than my competitors in the market. We had a sudden surge of sales when we released FinEasy Calculator and our price at this moment is $2.50

Yes just two and a half bucks, and all that backed by 2checkout.com [ our reseller's 15 day money back warranty ]. We are an honest online merchant and our software is listed on major news portals such as Times Education Supplement, Softpedia and others. We have a reputation to keep which we have maintained over the years by bringing innovative products to world markets.

A month later and Tom send me an email thanking me for the product that helped him make wise investment decisions. 

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