The internal rate of return (IRR)
The internal rate of return (IRR) is a rate that allows investments to be analyzed the benefits by computing the expected growth rate of the investments return by expressing into a percentage. The IRR calculates the net present value (NPV) of the investments’ yield and compares the performance of the investments in different periods of time. The payback period is the amount of time that it takes to finish to pay the cost of the investment. The discount payback period is a capital budget that used to predict the profit of investment in a given period.
The internal return rate (IRR) of the Winery project is 33%, and it is greater than the assumed discount rate, which is 15%. This means that the Winery project has more return of about 18%. The net present value (NPV) is $720,558 of the Winery projects. It implied that the present value of the future cash flow of investments’ using 15% is $720,558. It means that the investment rate of 15% exceeds the initial investment by $720, 5558. The NPV gives the quantity of the overall project and assumes that all the assumptions are correct and will give the contributions in dollars whereby the IRR doesn’t give. Based on the result of NPV and IRR, we find the project that a wine love had decided for the winery is profitable.