Planit:Rate of Return Calculator
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The Rate of Return Calculator is used to calculate the rate of return on an investment when it is subject to irregular costs or benefits.
Asset Value: Is the purchase price of the asset.
Liabilities: Is the total amount of debt or leverage used in purchasing the investment.
Discount %: Interest rate used to determine the present and future values.
Start Year: Year in which irregular cash flow starts. This value does not impact the calculations.
# Periods: Is the number of years for which you wish to enter the calculation. This is important for future value calculations. This would reflect the number of years prior to selling the investment.
Net Present Value: Value in cash today given our assumed discount rate.
Standard Deviation: The standard deviation measures the degree to which the payments differ from the average of all of the payments. The smaller the deviation the less the values vary from the average. This is often used as a factor in assessing risk, since the more consistent the payment stream the less risk to the investor if forced to sell.
Future Value: The cash value at the end of the period given the discount rate, payments and number of periods.
ARR (Adjusted Rate of Return): Is a statistical rate of return calculation that assumes reinvestment of benefits to fully account for the time value of money. It is the discount rate at which the future value of benefits received plus investment benefits equals the present value of all of the investment costs.
IRR (Internal Rate of Return): The IRR is a dollar weighted average. It does not assume reinvestment of benefits. IRR is the same as the discount rate at which point the present value of benefits exactly equals the present value of costs, or where the net present value of the investment overall is zero.
ROA (Return on Asset): Is the annual compound rate of return on the asset value, required to generate the net benefits realized from the investment.
ROE (Return on Equity): Is the annual compound rate of return, based on the net invested capital, required to generate the net benefits realized from the investment. As the equity in the investment approaches zero the ROE will approach infinity and be little or no value as a rate of return calculation.