The Project Internal Rate of Return (PIRR) represents the yield of a project, regardless of the financing structure. Unlike the NPV where the discount rate is stated and the NPV is calculated, the PIRR is calculated by setting NPV = 0. The higher the PIRR for a project the better, though the expected PIRR value will vary depending on the project sector as well as the financier's investment mandate. Using the same project data from Box 3 - 6 above, the PIRR (see Box 3 - 7) for this project is 12.26%.
Box 3 - 7 | |||||
Period | 0 | 1 | 2 | … | 10 |
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Net Cash flow before financing | -£70,500,000 | £10,158,463 | £10,158,463 |
| £16,413,357 |
Discount Value | -£70,500,000 | £9,049,206 | £8,061,075 |
| £5,164,430 |
NPV = 0 | £0 |
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Project IRR | 12.26% |
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