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Management Accounting

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(Querist)
02 August 2010 IS Internal Rate of Return calculated on pre tax cash flows or post tax cash flows?
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CMA Ramesh Krishnan

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CMA Ramesh Krishnan (Expert)
02 August 2010 it is on post tax cash flows
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suresh ananthuni

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suresh ananthuni (Querist)
02 August 2010 any other opinion
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CA Punit

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CA Punit (Expert)
02 August 2010 IRR is the rate at which npv = 0
NPV is calculated on after tax cash flows
so IRR is calc on post tax cash flows
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VINOD ARORA

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VINOD ARORA (Expert)
02 August 2010 IRR is supposed to make the present value of future cash flows plus the final market value of an investment or business opportunity equal the current market price of the investment or opportunity. So obviously we should consider tax effect, otherwise IRR may be misleading or of limited use!!

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