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The Internal Rate of return graphic shows the investor's after-tax
year to year internal rate of return on the initial amount invested.
The internal rate of return calculation uses the initial investment
amount, a series of after-tax cash flows and the after-tax sales
proceeds in a given year to calculate an average yearly return,
internal rate of return, for an income property investment.
If you place a high degree of importance on the internal rate of
return calculation, you should be aware of its short comings.
If in year ten the IRR is 20 percent, the yearly cash flows for each
year 1 through 10 are being ran forward at the internal rate of 20
percent. If the IRR is 2 percent in year 10, the cash flows are
being ran forward at 2 percent. What does this mean?
The internal rate of return calculation can exaggerate your return
on investment. To learn more about the internal rate of
return, click on the following link.
Internal
Rate of Return
The Internal Rate of Return graphic can be created in a line,
step or bar format. Note: Graphs are scanned and will look a
little fuzzy.
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