Finance Lab
A formula is not a fact. It is a decision.
Each experiment walks the same six stages: read the formula, understand what it claims, manipulate the variables, observe the sensitivity, solve for a target, then apply it to a decision.
Corporate Finance
IRR, MIRR, and payback
0 = Σ [CFₜ ÷ (1 + IRR)ᵗ] − C₀
IRR is the discount rate that makes a project's NPV exactly zero. It is a rate, not an amount, so it must be read alongside NPV and payback.
What each symbol means
- Initial investment
- Cash committed at time zero.
- Cash flows (years 1-5)
- Net cash flow at the end of each year.
- Cost of capital
- The return available elsewhere at similar risk.