This page reconstructs the IRR shown in the Asset Financing tab using the same per-year cash flows as the annual summary table. The IRR is the discount rate that makes the net present value (NPV) of the equity cash flows equal to zero.
Key Inputs & Exit Values
| Asset purchase value | $700,000 |
| Loan amount | $500,000 |
| Initial equity (input) | $200,000 |
| Setup costs (upfront) | $6,000 |
| Equity invested (Year 0 outflow) | $206,000 |
| Exit year | 10 |
| Asset value at exit | $1,036,171 |
| Loan balance at exit | $309,806 |
| Exit cost | $20,723 |
| Exit proceeds (sale value − loan balance) | $726,365 |
IRR Cash Flows & Discounting
IRR
12.01%
| Year | Operating CF | Exit Proceeds | Total CF | DF @12.01% | PV |
|---|---|---|---|---|---|
| 0 | — | — | ($206,000) | 1.0000 | ($206,000) |
| Y1 | ($13,730) | — | ($13,730) | 0.8928 | ($12,258) |
| Y2 | ($6,470) | — | ($6,470) | 0.7970 | ($5,157) |
| Y3 | ($5,160) | — | ($5,160) | 0.7115 | ($3,671) |
| Y4 | ($3,797) | — | ($3,797) | 0.6352 | ($2,412) |
| Y5 | ($2,380) | — | ($2,380) | 0.5671 | ($1,349) |
| Y6 | ($906) | — | ($906) | 0.5063 | ($458) |
| Y7 | $627 | — | $627 | 0.4520 | $284 |
| Y8 | $2,222 | — | $2,222 | 0.4035 | $896 |
| Y9 | $3,880 | — | $3,880 | 0.3602 | $1,398 |
| Y10 | ($15,119) | $726,365 | $711,246 | 0.3216 | $228,728 |
| NPV @ IRR (should be ≈ 0) | ($0) | ||||
Per-Year Operating Cash Flow Breakdown (matches Asset Financing summary table)
| Year | Gross Revenue | Operating Cost | Interest | Principal | Trans. Fees | Tax | Net Cash Flow |
|---|---|---|---|---|---|---|---|
| Y1 | $42,000 | $10,500 | $24,109 | $15,121 | $6,000 | $0 | ($13,730) |
| Y2 | $43,680 | $10,920 | $23,353 | $15,877 | $0 | $0 | ($6,470) |
| Y3 | $45,427 | $11,357 | $22,559 | $16,671 | $0 | $0 | ($5,160) |
| Y4 | $47,244 | $11,811 | $21,725 | $17,505 | $0 | $0 | ($3,797) |
| Y5 | $49,134 | $12,284 | $20,850 | $18,380 | $0 | $0 | ($2,380) |
| Y6 | $51,099 | $12,775 | $19,931 | $19,299 | $0 | $0 | ($906) |
| Y7 | $53,143 | $13,286 | $18,966 | $20,264 | $0 | $0 | $627 |
| Y8 | $55,269 | $13,817 | $17,953 | $21,277 | $0 | $0 | $2,222 |
| Y9 | $57,480 | $14,370 | $16,889 | $22,341 | $0 | $0 | $3,880 |
| Y10 | $59,779 | $14,945 | $15,772 | $23,458 | $20,723 | $0 | ($15,119) |
The “Operating CF” column in the IRR table above comes directly from the “Net Cash Flow” column here. In the exit year, exit proceeds (sale value − loan balance) are added to the operating cash flow.
How the IRR is built
- Year 0 outflow = equity invested = initial equity + upfront setup costs = $206,000.
- Years 1 → exit receive the per-year net cash flow from the annual breakdown: gross revenue − operating cost − transaction fees − interest − tax − principal repayment. These vary each year as revenue grows with asset value and interest/principal shift over the loan life.
- In the exit year, exit proceeds are added = asset value at exit − remaining loan balance = $726,365. (Exit cost is already deducted within that year’s operating cash flow via transaction fees, so it is not subtracted again.)
- IRR is the rate where the sum of discounted cash flows (NPV) = 0. Computed IRR = 12.01%; NPV at that rate = ($0).