IRR

waroon.chhabra
Posts: 2
Joined: Sat Nov 07, 2015 4:10 am

IRR

Postby waroon.chhabra » Thu Nov 19, 2015 4:50 pm

I need help solving this real life example:

Cost 2000000
Finance Amount 1700000
Tenure 12 months
Interest rate to customer 4.88%
Upfront deduction for subvention 28000
Total Interest (customer+subvention) 7.99%
Payment to Company from SFS After 90 days
EMI from customer for 12 months $1,45,439

Cost 2000000
Finance Amount 1700000
Tenure 24 months
Interest rate to customer 5.88%
Upfront deduction for subvention 88000
Total Interest (customer+subvention) 11.16%
Payment to Company from SFS After 90 days
EMI from customer for 24 months $75,253

I need help in calculating IRR for both to determine which scheme is favourable, and also to determine if any other tenure should be chosen to boost profitability further.

Thanks

Tags:

edupristine
Finance Junkie
Posts: 722
Joined: Wed Apr 09, 2014 6:28 am

Re: IRR

Postby edupristine » Thu Dec 03, 2015 6:49 am

If the cash flows given by you are correct, then below is the attached excel file representing the solution of your question:
Cashflows.xlsx
(12.86 KiB) Downloaded 586 times

waroon.chhabra
Posts: 2
Joined: Sat Nov 07, 2015 4:10 am

Re: IRR

Postby waroon.chhabra » Thu Dec 03, 2015 4:07 pm

Thanks for the reply

I also wanted to know, is there any way to calculate if there is a better tenure period which will offer a better IRR than the 24 month period IRR

Thanks

edupristine
Finance Junkie
Posts: 722
Joined: Wed Apr 09, 2014 6:28 am

Re: IRR

Postby edupristine » Fri Dec 04, 2015 11:24 am

To calculate the tenure we need interest rates and subvention amount at all maturities to calculate IRR. So please give the interest rate for the period you want to calculate the IRR.


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