1. Brealey
R. A.
Myers
S. C.
& Allen
F. (2020). Principles of Corporate Finance (13th ed.). McGraw-Hill Education. In Chapter 5
Section 5-2
"The Internal Rate of Return
" the IRR is defined as "the rate of discount that makes NPV = 0." The methodology of equating the initial investment to the present value of an annuity is demonstrated.
2. Massachusetts Institute of Technology. (2003). 15.402 Finance Theory II
Spring 2003. MIT OpenCourseWare. In Lecture Notes
"Lecture 2: Capital Budgeting
" page 3
the IRR is defined as the discount rate
y
that solves: NPV = Σ [CFt / (1 + y)^t] = 0. This supports the principle of finding the rate that equates the present value of inflows to the initial cost.
3. Ross
S. A.
Westerfield
R. W.
& Jaffe
J. (2019). Corporate Finance (12th ed.). McGraw-Hill Education. Chapter 5
"Net Present Value and Other Investment Rules
" details the calculation of IRR through trial and error or by solving for the rate (r) in the present value of an annuity formula
which is the method applied here.
