Hi folks,
Ran into a kind of a tricky situation while calculating the IRR on a road project.
I ran a basic IRR calculation for the project which included the initial Capex and then the positive cashflows. So if the Capex is 100 and the cashflows from year 2 to year 10 are 25, my irr on excel is =irr (-100,25,25,25....). Simple enough.
However, the client believes the IRR calculation is wrong and should also include the NPV of the project! So if I discount the above cashflows at say 10% and come up with an NPV of say 50, my IRR formula should read =irr (-50,-100,25,25,25...).
Does this make any sense? He believes that is the IRR for the project.
Any views would help.
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