Internal Rate of Return: How to Measure Financial Investment

The financial analysis principle of net present value enabled us to first calculate the present value of an investment and then subtract the actual cost of the asset from its present value. The N.P.V. calculations were made with a minimum rate of return already established by the firm. In this section, in- stead of solving for the N.P.V., we solve for the internal rate of return (I.R.R.). The I.R.R. calculation measures the yield or rate of return on an investment rather than its present value. The present value is assumed to be the initial cost of the asset. The I.R.R. calculation measures the yield from a series of cash flows across a specified period of time and includes the cost of the asset, the cash flows from the asset, and the salvage value of the asset at the end of its useful life. In the case of plant and equipment, an asset’s useful life may be exhausted at the end of a period due to functional or technical obsolescence. The useful life of real estate, which may actually increase in value over time, is said to be exhausted when the property is divested.

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Investing Basics On Credit Default Swaps Explained

People who are interested in investing their finance know that there are inherent risks that may be taken when putting money in a particular venture. Since many people feel a lot more assured if such risks are countered accordingly, most individuals find it necessary to have these methods such as CDS or credit default swaps explained properly to them so they know what to expect and what they are actually investing in.

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Invest in High Yield Savings Account With a FDIC Insured Bank

If you have some hard earned savings to invest that can generate high interest rate, you should deposit it in a high-yield savings account. It is a risk free investment because you can open a savings account and put in the maximum amount protected by the FDIC. During these uncertain times, savings accounts, money market and certificates of deposits represent the surest way to invest your money.

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