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Discount Rate—Explanation, Definition and Examples

Valutico

Internal Rate of Return (IRR): IRR represents the discount rate at which the net present value (NPV) of all cash flows from the investment becomes zero. In other words, it is the rate of return that makes the present value of future cash inflows equal to the present value of cash outflows.

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Discounted-Cash-Flow-Analysis: Your Complete Guide with Examples

Valutico

This value is widely referred to as the “Net Present Value” (NPV). . which produces a Net Present Value of the Terminal Value of: $74 million. . So the Terminal Value here is three times as large! Rf = Risk-free Rate. Rm – Rf) = Equity Market Risk Premium.