Welcome to Experts Exchange

Add your voice to the tech community where 5M+ people, just like you, are talking about what matters.

  • Help others & share knowledge
  • Earn cash & points
  • Learn & ask questions
Solved

solving payoff amount x in last period using a IRR using mysql

Posted on 2008-10-11
4
485 Views
Last Modified: 2013-12-13
I want to pick an IRR=r (say 15%), and determine how much would have to be paid in the last period of the cash flow sequence to achieve this IRR.
e.g.
using wikipedia e.g.
0      -100
1      40
2      59
3      55
4      x

Solving the summation equation for x
x = the amount that needs to be paid to reach an internal rate of return of 15%
r = .15
NPV = 0 = -100 + 40/(1+.15)^1 + 59/(1+.15)^2 + 55/(1+.15)^3 + x/(1+.15)^4 for x
0= -100 + 34.78261 + 44.61248 + 36.16339 + x/(1+.15)^4
0 = 15.5585 + x/(1+.15)^4
-15.5585 = x/1.749006
-15.5585*1.749006 = x
-27.2119 = x

(note: in this example the value of x is negative, but in most cases it will be positive)

please see bayparkcapital.com/topiclistE.php for progress to date
0
Comment
Question by:derekstattin
  • 2
  • 2
4 Comments
 
LVL 24

Expert Comment

by:mankowitz
ID: 22696408
I think I understand the problem.

Assume that your data are stored in an array like this

$seq = array(0=>-100, 1=>40, 2=>59, 3=>55);
$period_to_solve = 4;
$rate = 0.15;

//First sum everything up
for ($x=0; $x<$period_to_solve; $x++)
{
$sum += $seq[$x] * pow($rate + 1, $x);
}

// NPV = {sum} + x/(1+rate)^4
//  -{sum} * (1+rate)^4 = x
$final_period = 0 - $sum * pow(1+$rate,$period_to_solve);
0
 

Author Comment

by:derekstattin
ID: 22696935
Thank you for the example.
It all seems to work except on little thing
The $sum should be equal to 15.5585. I ran another example using 30, 32, and 40, but the results in Excel are not the same as using the function above.
Thanks for the help,
0
 
LVL 24

Accepted Solution

by:
mankowitz earned 500 total points
ID: 22698340
Sorry, my mistake. I think I misread the formula. Change

$sum += $seq[$x] * pow($rate + 1, $x);

to

$sum += $seq[$x] / pow($rate + 1, $x);
0
 

Author Comment

by:derekstattin
ID: 22698698
Great,  thanks so much. I should have noticed that. Now I will try to integrate this in with
www.bayparkcapital.com/G.php
I will post a couple more questions shortly.
0

Featured Post

Free Tool: Port Scanner

Check which ports are open to the outside world. Helps make sure that your firewall rules are working as intended.

One of a set of tools we are providing to everyone as a way of saying thank you for being a part of the community.

Question has a verified solution.

If you are experiencing a similar issue, please ask a related question

Suggested Solutions

International Data Corporation (IDC) prognosticates that before the current the year gets over disbursing on IT framework products to be sent in cloud environs will be $37.1B.
Introduction This article is intended for those who are new to PHP error handling (https://www.experts-exchange.com/articles/11769/And-by-the-way-I-am-New-to-PHP.html).  It addresses one of the most common problems that plague beginning PHP develop…
Learn how to match and substitute tagged data using PHP regular expressions. Demonstrated on Windows 7, but also applies to other operating systems. Demonstrated technique applies to PHP (all versions) and Firefox, but very similar techniques will w…
The viewer will learn how to create and use a small PHP class to apply a watermark to an image. This video shows the viewer the setup for the PHP watermark as well as important coding language. Continue to Part 2 to learn the core code used in creat…

856 members asked questions and received personalized solutions in the past 7 days.

Join the community of 500,000 technology professionals and ask your questions.

Join & Ask a Question