[OPE-L:4337] Re: Problems in Vol. III

Allin Cottrel (cottrell@wfu.edu)
Mon, 10 Mar 1997 12:28:12 -0800 (PST)

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> Could you please say a bit more. Perhaps you
> could use the numbers in the example so that
> I can catch on to what you are saying.

The IRR is the value of r such that

C = (the summation of) S_t/[(1 + r)^t]

where C is the present sum that has to be laid out and S_t
is the net revenue to be received in period t. The 'S'
values represent the total revenue from sales in each
period, minus any further outlays that are required.
Applying the formula forces one to be quite explicit in
one's assumptions of when costs are incurred.