Expert: Paul Henneman - 10/21/2008

Question
Hi Paul,
I'm taking CFA Level 1 now. Will sit for the exam next year. There's this IRR thing that gets me worried. I still don't know how to calculate IRR manually. I don't want to rely on the calculator as it's defeating. Can you show me how to calculate IRR with irregular cashflow, manually? This will be a big help.

By the way, are you familiar with probability?

Answer
Chow,
  Thank you for your question! The explanation of how to manually calculate Internal Rate of Return is really too long for me to be able to completely provide it here. I did however find some links online that may offer you the complete information you need. I did a google search on "How to Calculate IRR" and got several good results. Here is one of them:

http://www.experiglot.com/2006/08/09/how-to-calculate-an-internal-rate-of-return...

I hope this helps! Please do not hesitate to follow up with me if I can be of any additional service.

Sincerely,
Paul Henneman
President
ValuEngine Inc
www.ValuEngine.com