A Predictive Model for Determining Internal Rate Return (Irr) Without Trial and Error

Abstract

Planners are often confronted with challenges of evaluating proposed capital projects. The most popular tools are, inter alia 1 Net present value (NPV) 2 Benefit/ cost ratio and 3 Internal Rate of return (IRR) While the first two are straight forwardly determinable IRR on the other hand, requires a trial and error measures. Based on current literature. This is not only challenging in time consumption but presents enormous obstacle for financial advisors during brief sessions with the un-informed Business owners. The foretasted elicits is a need to develop a straight forward model to approximate IRR without the “TRIAL AND ERROR” Routine Methodology: The employment of ratio analysis and mathematical logic based on inductive reasoning determined that relationships exist among cost of capital, Benefit/cost ratio and IRR subsequently an Illustrative example on a capital project proved that the model espoused here in is useful.