Hello, I can't thank you enough for the great support and detailed explanation. I've been trying to understand it for hours, until I saw your publication. Cheers!
We need more videos like this. The uni lecturers cover too much content within just 2 hours and the weekly tutorial tutors are not good quality teachers. We get confused about the lecture materials all the time but no one gives clear explanations. Thank you for doing this for us and well done!!
r = 1/10 (sqrt(69) - 7) = 0.130662 = 13.0662% Simplify the equation: The term (1+r)^0 equals 1 because any number raised to the power of 0 is 1. So, the equation simplifies to -100 + 60/(1+r) + 60/(1+r)^2 = 0. Combine like terms: To make the equation easier to solve, we combine the terms over a common denominator, which in this case is (1+r)^2, leading to -100*(1+r)^2 + 60*(1+r) + 60 = 0. Expand and simplify: We then expand the equation to get rid of the parentheses and combine like terms: -100*(1 + 2r + r^2) + 60 + 60r = 0, which simplifies to -100 - 200r - 100r^2 + 60 + 60r = 0, and further simplifies to -100r^2 - 140r - 40 = 0. Solve the quadratic equation: This is a quadratic equation in the form ar^2 + br + c = 0, where a = -100, b = -140, and c = -40. We use the quadratic formula to solve for r: r = (-b ± sqrt(b^2 - 4ac))/(2a), substituting the values of a, b, and c, we get: r = (140 ± sqrt((-140)^2 - 4*(-100)*(-40)))/(-200). Calculate the solutions: We calculate the discriminant sqrt((-140)^2 - 4*(-100)*(-40)) and then find the two values for r by adding and subtracting the square root of the discriminant from -b and dividing by 2a. Wolfram Alpha confirms the solutions to the equation as: r = 1/10 (-7 - sqrt(69)) r = 1/10 (sqrt(69) - 7) = 0.130662 = 13.0662%
Outstanding videos. Your teaching style is amazingly thorough yet clear, concise, and articulate. I wish all professors taught the way you do. Thank you again
@Serkan the very simple quadratic root equation will not work if the cashflows are different every year, it only works under uniform consistent cashflows
man I'm a mechanical engineering student but I had to take this business subject , I was really suffering with this topic,,, but thanks to your video , you made it so much easier for me to get it, thank you so much , it really helped me out !
Great video, thank you. You can solve the equation quadratically. Pretend 1+r is x, and solve for x. You will get 2 solutions. one is impractical as a negative rate, and the other is the correct one. In this example, the solutions are 1.13 and 0.53. remember those are still 1+r. so solving for r will yield -0.47 and 0.13 (-47% and 13%). The correct answer is obviously +13%. Else, use excel's formula for IRR.
thanks a million , much appreciated !! you are doing an amazing job , i'm a finance student from algeria and my professors suck big time they only give us the formulas without really explaining them .. your videos are extremely helpful
I was wondering what this IRR even though i could calculate using excel sheet, but this video along with the previous one explains IRR in practical term.Thank you.
Good luck in your exam tomorrow, Neo! There's actually a formula to 'approximate' it instead of guessing, but I don't recommend it coz it only works in "uniform" situations where the cash flow is consistent... cheers!
Highly advice using a calculator with functions for cash flow and irr. Took me about 4 seconds to find the answer. Thanks for the video anyway, was really wondering why it was called INTERNAL!
Thank you so much :-) im really having hard time analyzing how to calculate IRR but because of ths i understand nw. Ths s really a big help to my report .
Can you tell me how you got -1.2 (Third row of calculation @09:32) I know you calculated the line above but I am getting a different figure to you. Likewise for 1.4 and 0.09 later on in the video Can you do a step by step in the comments please :) Thanks
Best explanation ever!!! Thank you so much MBAbullshit! I was trying to figure this out for my exam tomorrow and was thinking omg this is bull!!! then ur you tube example came up, thank you so much, i get it now! :)
This is super easy and useful, but unfortunately not the formula/equation my professor's asking for. Still, THANK YOU, for other videos, you're superb!
Excellent explanation! Although, my calculator does most of the calculations but this helped me to understand the underlining process. I am looking forward to watching how you calculate the NPV with a formula. I am struggling a bit with what formula to use in order to compare two lease agreements. Do you have anything that I can look at for this? Maybe I can email you the questions containing Lease A and Lease B details?
Its a long one, for me.. Here's. Just find NPV of cash flow. One from positive amount and one from negative amount. With high difference in hitting IRR%. Then again Interpolate the values. IRR= LR + [NPV(LR)/NPV (LR)- NPV (HR) { look here the npv from HR was negative. It will add to the npv lr} ] ×(HR - LR) and you get the little or more difference in answer. But take that value of irr say 25%. Just go little down to 22% for LR and go 27 for HR. And find NPV at those values. And do it again. You will get. 99% correct answer. (Problem with this was the direction. We dont know where to check irr. Get the direction first. Then you will catchup speed). If the cost is given. Take the reference from it. And see how much you have to decrease from it to get near the zero value.
@tazer1989 Hey Tazer. Putting negative sign in an exponent is just a shortcut to the conventional way where they put the positive exponent in a denominator. So the only difference is that it's faster. Cheers!
Unfortunately it did not work out for my calculation given by the professor. Is there any difference if it is not an investment but a loan?! We have to calculate it with fluctuating interests; so does the IRR fluctuate as well?
Thanks for all of your videos, they are the best around because even I can understand them (and I haven't done this kind of maths since I left school which was over 30 years ago!)!!! Can you explain how you reached the answer "-1.2=0" when r=14% (i.e. Can you break down the calculation because i can't get to that number please?) Thank so much!
The video is really helpful but the shorter the video, the more attractive it would be. There are times that you give too much explanation like obviously, zero is not equal to 1.2 and the algebra thing. Anyway, your topic is great :) I'm sure I'm gonna need it in my course.
I wish my professors would explain these concepts like this. I agree that you have to guess and check to find the rate. Very time consuming especially during an exam. And when not aloud to use electronic devices that do it for you (Like what every professional does).
your explainations are always great.. I hate accounts but it feels nice n easy to learn from your videos... I want to ask u one fing. in the rest of the vids or on net, I have seen only you putting the negative signs in the years on the PV formula... does it make any difference? thank you so much... :)
@choddopice Hi, as of now, nope, sorry. Maybe in the future, yet. I'm actually very good at explaining sensitivity analysis, but I don't have time right now. The videos look simple to make but they actually take a VERY long time to think of how to explain them in a simple way. Cheers.
yo, this is bullshit for real. thanks a lot man...I feel dumb, but I'll feel smart getting those marks. you're too cool for doing this man...thanks again.
Hello,
I can't thank you enough for the great support and detailed explanation. I've been trying to understand it for hours, until I saw your publication.
Cheers!
We need more videos like this. The uni lecturers cover too much content within just 2 hours and the weekly tutorial tutors are not good quality teachers. We get confused about the lecture materials all the time but no one gives clear explanations. Thank you for doing this for us and well done!!
Monica Zhang thanks for sharing the video!
r = 1/10 (sqrt(69) - 7) = 0.130662 = 13.0662%
Simplify the equation: The term (1+r)^0 equals 1 because any number raised to the power of 0 is 1. So, the equation simplifies to -100 + 60/(1+r) + 60/(1+r)^2 = 0.
Combine like terms: To make the equation easier to solve, we combine the terms over a common denominator, which in this case is (1+r)^2, leading to -100*(1+r)^2 + 60*(1+r) + 60 = 0.
Expand and simplify: We then expand the equation to get rid of the parentheses and combine like terms: -100*(1 + 2r + r^2) + 60 + 60r = 0, which simplifies to -100 - 200r - 100r^2 + 60 + 60r = 0, and further simplifies to -100r^2 - 140r - 40 = 0.
Solve the quadratic equation: This is a quadratic equation in the form ar^2 + br + c = 0, where a = -100, b = -140, and c = -40. We use the quadratic formula to solve for r: r = (-b ± sqrt(b^2 - 4ac))/(2a), substituting the values of a, b, and c, we get: r = (140 ± sqrt((-140)^2 - 4*(-100)*(-40)))/(-200).
Calculate the solutions: We calculate the discriminant sqrt((-140)^2 - 4*(-100)*(-40)) and then find the two values for r by adding and subtracting the square root of the discriminant from -b and dividing by 2a.
Wolfram Alpha confirms the solutions to the equation as:
r = 1/10 (-7 - sqrt(69))
r = 1/10 (sqrt(69) - 7) = 0.130662 = 13.0662%
the most patience professor.... thx a lot Sir, now i understand IRR
Glad you understand internal rate of return irr better now!
Thank You sooooo much!! This was way better to understand than my class last night. Now, I don't have to be sitting there confused and lost.
Eric Logan you're wellllllllcome! glad you're not confused anymore
Easier than I thought, very well explained. You are a life saver, cheers.
Glad you're still alive!
Now that is the kind of explanation that I didn’t think I needed. That went straight into my head.👏
Outstanding videos. Your teaching style is amazingly thorough yet clear, concise, and articulate. I wish all professors taught the way you do. Thank you again
I'm here for the difficult learners, Ritul; as I too was one in the past.
@Serkan the very simple quadratic root equation will not work if the cashflows are different every year, it only works under uniform consistent cashflows
Wounder full. Very simple and easy to learn. Thanks a lot and keep doing this.
Glad you find it wonderful!
You are far better than my french professor!!!
man I'm a mechanical engineering student but I had to take this business subject , I was really suffering with this topic,,, but thanks to your video , you made it so much easier for me to get it, thank you so much , it really helped me out !
glad you're not suffering as much anymore!
@rodshockin The exponents show which year the cashflow comes. And secondly, which numbers that small?
Why can't all professors explain things this clearly? Thanks for helping us find our way through the bullshit! :)
Thanks man!
I just feel that I am ready to get a CFA sertificate after such great lessons!
Great video, thank you.
You can solve the equation quadratically. Pretend 1+r is x, and solve for x. You will get 2 solutions. one is impractical as a negative rate, and the other is the correct one. In this example, the solutions are 1.13 and 0.53. remember those are still 1+r. so solving for r will yield -0.47 and 0.13 (-47% and 13%). The correct answer is obviously +13%. Else, use excel's formula for IRR.
thanks a million , much appreciated !! you are doing an amazing job , i'm a finance student from algeria and my professors suck big time they only give us the formulas without really explaining them .. your videos are extremely helpful
This is Best explanation of IRR…., don’t waste time on other videos
Glad you liked the explanation!
I was wondering what this IRR even though i could calculate using excel sheet, but this video along with the previous one explains IRR in practical term.Thank you.
Glad you found it practical!
what would do without you.... Because of you i love finance ....
Thanx alot ...
Good luck in your exam tomorrow, Neo! There's actually a formula to 'approximate' it instead of guessing, but I don't recommend it coz it only works in "uniform" situations where the cash flow is consistent... cheers!
@Karim thanks! Although for the other stuff, not anytime soon; got too many requests for different stuff, cheers
Best of lecture I have ever watched regarding IRR
Glad you find it the best!
@Anastasis you're very welcome and glad you understand
I have an exam tommorow on Finance and I want to take the time to thank you, because youve probably enabled me to gain an extra 20 marks.
i'm preparing for my exam and this guy is helping me a lot, thank you
Hope it helped in your exam!
brilliant man.. you definitely explain better then my Irish professor.. thanks alot
Umair Hussain glad you like the explanation!
What a great job you've done! Thanks, man... your explanations are awesome.
A great thanks Mauricio Londoño Restrepo !
Highly advice using a calculator with functions for cash flow and irr. Took me about 4 seconds to find the answer. Thanks for the video anyway, was really wondering why it was called INTERNAL!
So now you know! But it's actually just my take on in...
There’s a way you can solve part of interest rate with quadratic formula, but thanks for making this topic simpler to understand.
Glad it helped!
Thank you! You're uplifting me to love this financial subject! :D
Glad you feel uplifted!
Very! Very clear, tks so much!!!! I suggest explaining the method by interpolation too.
Luiz Martins Souza thanks too!
Too much rubbing in second video, flow need to be little faster. Material is excellent.
@MissRocknRollCatt Hi! Which equations?
Gift for explaining clearly. Very helpful - thank you!
Happy you find it helpful!
Excellent!!!! Management made easy keep it up!!
Thanks for the input in your reply to Vibes! Interesting....
Your videos really helped me a lot, Thanks for sharing with us :D
Abdul. wellserv happy to have shared!
superb....
this guy is making economics very easy...
superb... thanksss
Thank you so much :-) im really having hard time analyzing how to calculate IRR but because of ths i understand nw. Ths s really a big help to my report .
This helped me out a lot! Thank you very much!
Robert Rantz glad it helped you!
thanks! it is much simple to be understand than the complex explanation of the book
Jingkun Ouyang glad you find it easier than your textbook!
never gonna forget how to calculate IRR...awesome....
+upneet kaur wow, "unforgetable" how romantic! :p
Thanks mukunify and dilnawaz! good luck to ya!
@Antoinette glad you find it awesome!
it's very clear and it helps for better understanding. .. also appreciate if you can explain other items in shorter time
You are a life saver👏🏾👏🏾
+Kwanele Mamba glad you're still alive!
@sherns glad you found it!
Can you tell me how you got -1.2 (Third row of calculation @09:32)
I know you calculated the line above but I am getting a different figure to you.
Likewise for 1.4 and 0.09 later on in the video
Can you do a step by step in the comments please :) Thanks
your lec are simple.. great to have u in youtube
Thank you so much for this. Best video I have seen so far
Glad to hear that!
hey Bozz, can you show your calculation?
THIS IS A+. THANK YOU SO MUCH.
An A+ THANKS to you too!
@katy glad it's now easy for you!
yes you can, but a financial calculator can only be used if the cash flows are the same and consistent.. cheers!
I had stand in our gaps, Allelulia! God bless ya
thank you. i subscribed to pay for your professional service. please keep it coming.
Thanks for subscribing!
@Lesle hope ur headache is cured now!
Best explanation ever!!! Thank you so much MBAbullshit! I was trying to figure this out for my exam tomorrow and was thinking omg this is bull!!! then ur you tube example came up, thank you so much, i get it now! :)
Thanks for the easy step by step explanation, very much helpful
wollstonecraft51 glad you find it helpful, cheers
OMG, this was an awesome lesson. Thank you so very much and to think I could have turned it away because of the bad word used.
This is super easy and useful, but unfortunately not the formula/equation my professor's asking for. Still, THANK YOU, for other videos, you're superb!
@bagio69 I don't know how to use your specific calculator but in mine, yes, I press yX first and then do the -1 or -2. Cheers!
Very clear and helpful, thank you!
this helped me alot.... love ya man
Ivan Lim glad it helped, love ya guys too!
I am so glad I found you guys!
Glad you found us
@Kaychaos glad you find it easy now :)
Thank you so much! now I understand how to calculate IRR!
u r fantastic . so easy and understandable instructing
A fantastic thanks to you!
This is helped me so much for better understanding the concepts
Sharan BC Glad you understand it better!
my professor must just be terrible, this is so simple! Thanks!
Excellent explanation! Although, my calculator does most of the calculations but this helped me to understand the underlining process. I am looking forward to watching how you calculate the NPV with a formula. I am struggling a bit with what formula to use in order to compare two lease agreements. Do you have anything that I can look at for this? Maybe I can email you the questions containing Lease A and Lease B details?
Thank you so much, really clear explanation, feeling confident now 👍🏻
Glad it helped!
Its a long one, for me..
Here's.
Just find NPV of cash flow. One from positive amount and one from negative amount. With high difference in hitting IRR%. Then again Interpolate the values.
IRR= LR + [NPV(LR)/NPV (LR)- NPV (HR) { look here the npv from HR was negative. It will add to the npv lr} ] ×(HR - LR)
and you get the little or more difference in answer. But take that value of irr say 25%. Just go little down to 22% for LR and go 27 for HR. And find NPV at those values. And do it again.
You will get. 99% correct answer.
(Problem with this was the direction. We dont know where to check irr. Get the direction first. Then you will catchup speed).
If the cost is given. Take the reference from it. And see how much you have to decrease from it to get near the zero value.
If you are already given the rate of return would I use the same technique to calculate IRR?
@tazer1989 Hey Tazer. Putting negative sign in an exponent is just a shortcut to the conventional way where they put the positive exponent in a denominator. So the only difference is that it's faster. Cheers!
Now I understand it so much better thanks a lot! Can you explain it by calculating IRR with a financial calculator?
Thanks! It took me 1 sem and I still couldn't understand this concept. Our finals is tomorrow and I finally get it. I hope I pass.
Maggie G good luck in your exam tomorrow!
Thank you very much.. this was easy to understand..
Unfortunately it did not work out for my calculation given by the professor.
Is there any difference if it is not an investment but a loan?!
We have to calculate it with fluctuating interests; so does the IRR fluctuate as well?
Thanks for all of your videos, they are the best around because even I can understand them (and I haven't done this kind of maths since I left school which was over 30 years ago!)!!!
Can you explain how you reached the answer "-1.2=0" when r=14% (i.e. Can you break down the calculation because i can't get to that number please?)
Thank so much!
How did you get -1.2 in the left part ,@ 9:34 i've got 19.8
Need help
Am stuck🙏
Thanks alot man.. Really appreciate your hard work.
Excellent thank you so much. I'm finally getting it. 😊
Glad I could help!
Does this mean that it'll take 2 years to breakeven the cost of $100?
The video is really helpful but the shorter the video, the more attractive it would be. There are times that you give too much explanation like obviously, zero is not equal to 1.2 and the algebra thing. Anyway, your topic is great :) I'm sure I'm gonna need it in my course.
I wish my professors would explain these concepts like this.
I agree that you have to guess and check to find the rate. Very time consuming especially during an exam. And when not aloud to use electronic devices that do it for you (Like what every professional does).
@Alexander thanks and have a great day!
your explainations are always great.. I hate accounts but it feels nice n easy to learn from your videos... I want to ask u one fing. in the rest of the vids or on net, I have seen only you putting the negative signs in the years on the PV formula... does it make any difference? thank you so much... :)
@choddopice Hi, as of now, nope, sorry. Maybe in the future, yet. I'm actually very good at explaining sensitivity analysis, but I don't have time right now. The videos look simple to make but they actually take a VERY long time to think of how to explain them in a simple way. Cheers.
@ZeroTrace Thanks too and you're welcome again
@DMDMD hey man, I'm hear for the slow learners like myself in the past, cheers
@liee superrrrr thank you and God bless you too
awesome...gr8 wrk....woow
made simple
yo, this is bullshit for real. thanks a lot man...I feel dumb, but I'll feel smart getting those marks. you're too cool for doing this man...thanks again.
You're the absolute boss
+Olass Gafaru thanks, boss!
@Abhiraj haha I'm glad you kinda like math now
Thank You so much for this, this was very helpful.
Welcome, and glad you found it helpful!
This guy should get the nobel peace prize for bringing peace between students and their books
how do you type all the negative years onto the calculator?
+alex lokk you mean a negative exponent? Usually 10 raised to the negative 2 is = 10^-2