The difference between internal rate of return and other financial ratios
Posted: Sun Jan 12, 2025 7:04 am
IRP, WACC, CAGR and ROI are the main indicators used to evaluate the financial results of investments.
IRP (Internal Rate of Return): Determines the interest rate at which the present cash flows are equal to the initial investment, which gives an idea of how profitable a project is.
WACC (Weighted Average Cost of Capital): A ratio that shows the average cost of capital used in a project and helps establish the minimum level of return required to attract investors and prevent capital losses.
CAGR (Adjusted Annual Growth Rate): A tool that allows you to calculate the average annual return on an investment over a given period.
ROI (return on investment): This indicator helps to compare the profit received from an investment project with the costs associated with its implementation.
Differences between indicators
IRR and WACC . The first indicator 1000 phone data is determined based on all cash flows of the project and indicates the minimum profitability required to return the invested funds. WACC, in turn, serves as an indicator of the risk associated with the choice of investment opportunities. If the IRR value is lower than WACC, it is worth abandoning the project, if higher, the project has the potential for successful implementation.
IRR and CAGR : IRR shows the internal return on investment, while CAGR reflects the average annual return on investment over a certain period of time. When calculating CAGR, only the final result is taken into account without taking into account regular cash flows. This approach is simpler and more convenient for calculations.
IRR and ROI : IRR shows the percentage return on investment, while ROI is calculated as the ratio of the profit received to the invested funds, which indicates the profitability of the investment. This ratio helps to evaluate the change in the value of assets at the end of the reporting year compared to their initial level.
For a more accurate assessment of an investment project, it is recommended to use several calculation methods.
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Alexander Kuleshov
Alexander Kuleshov
General Director of Sales Generator LLC
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How to find out the 5 key marketing metrics in your company?
Step-by-step calculation template with fields where you can insert your data
How to make a KPI for a sales manager based on his work results?
Current template for calculating sales manager KPI
9 Examples of Universal Selling Commercial Proposals
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Cold Lead Processing Script Template
A checklist of ready-made questions for engaging cold clients
7 Profitable Marketing Strategies Examples
Will help increase customer flow by at least 30%
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doc 3.4 mb
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IRP (Internal Rate of Return): Determines the interest rate at which the present cash flows are equal to the initial investment, which gives an idea of how profitable a project is.
WACC (Weighted Average Cost of Capital): A ratio that shows the average cost of capital used in a project and helps establish the minimum level of return required to attract investors and prevent capital losses.
CAGR (Adjusted Annual Growth Rate): A tool that allows you to calculate the average annual return on an investment over a given period.
ROI (return on investment): This indicator helps to compare the profit received from an investment project with the costs associated with its implementation.
Differences between indicators
IRR and WACC . The first indicator 1000 phone data is determined based on all cash flows of the project and indicates the minimum profitability required to return the invested funds. WACC, in turn, serves as an indicator of the risk associated with the choice of investment opportunities. If the IRR value is lower than WACC, it is worth abandoning the project, if higher, the project has the potential for successful implementation.
IRR and CAGR : IRR shows the internal return on investment, while CAGR reflects the average annual return on investment over a certain period of time. When calculating CAGR, only the final result is taken into account without taking into account regular cash flows. This approach is simpler and more convenient for calculations.
IRR and ROI : IRR shows the percentage return on investment, while ROI is calculated as the ratio of the profit received to the invested funds, which indicates the profitability of the investment. This ratio helps to evaluate the change in the value of assets at the end of the reporting year compared to their initial level.
For a more accurate assessment of an investment project, it is recommended to use several calculation methods.
Increase Profits by 200%: Download 5 Powerful Tools for Free
Alexander Kuleshov
Alexander Kuleshov
General Director of Sales Generator LLC
Read more posts on my personal blog:
Over the past 7 years, we have conducted over 23,000 comprehensive website audits and I have learned that all of us as leaders need clear and working algorithms for our marketing and sales.
Today we will share with you the 5 most valuable documents that we have developed for our clients.
Download for free and implement today:
How to find out the 5 key marketing metrics in your company?
Step-by-step calculation template with fields where you can insert your data
How to make a KPI for a sales manager based on his work results?
Current template for calculating sales manager KPI
9 Examples of Universal Selling Commercial Proposals
Upgrade your CPs to close more deals
Cold Lead Processing Script Template
A checklist of ready-made questions for engaging cold clients
7 Profitable Marketing Strategies Examples
Will help increase customer flow by at least 30%
Download the collection for free
pdf 8.3 mb
doc 3.4 mb
Already downloaded
153274