Internal Rate of Returns

INTERNAL RATE OF RETURNS (IRR)

  • It is the rate of return per rupee invested in an agricultural project over its life span.
  • For example if the IRR is 30 per cent in a livestock project, it means that this project gets an average annual return of Rs. 30/ per Rs. 100/ invested in the project over its life span.
  • It is the rate of return at which the present value of total cash flows in a project is equal to zero. In other words, it is the discount rate at which the NPW of the project is zero, i.e.

IRR

  • For a project to be viable it should have a BCR of one or greater than one at the opportunity cost of capital and a NPW of zero or greater than zero at the opportunity cost of capital and the discount rate for IRR should be greater than the opportunity cost.
Last modified: Tuesday, 24 April 2012, 10:05 AM