Question

Select one of the following financial models to research: Payback, Net Present Value or Internal Rate of Return.

Define the model and expand on its usefulness as a tools for determining total costs of ownership. In your summary, address when this financial model might be most appropriate to use compared to other financial models.

Answer 1

Answer)

The internal rate of return is otherwise known as the IRR which is defined/measured as the investment's rate of return which refers to the fact that the calculations can exclude the external factors and also factors like risk-free rate, or the inflation, or the cost of the capital or any other financial risks. This is called the discounted cash flow rate of return which also is a helping hand in savings and loans, for the profitability of investment made and maximizing the net present value which can help in the calculation of private equity, capital management or the fixed income. This is even better /higher when the project is in pursuit and the IRR is higher than the discount rate.

It is also referred to as the discount flow rate of return which doesn't include the capital cost as well as inflation. This is mostly used for simplifying the project to a single name where the management will use to determine the viability of the project.

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