commercial real estate math. i can't seem to solve this, can someone show me the order of calculation to do this, thanks.
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[{"id": "f0ro478", "text": "-1000000\n50000\n51000\n52000\n53000\n1554000", "replies": [{"id": "f0rv32o", "text": "=IRR(...)", "replies": [{"id": "f0sq5y5", "text": "Well yeah... if you want excel to do it all for you....", "replies": [], "depth": 3}], "depth": 2}, {"id": "f0t4gr0", "text": "For HP12C, keystrokes are\n\n1000000 CHS g CF0\n\n50000 g CFj\n\n51000 g CFj\n\n53000 g CFj\n\n1554000 g CFj\n\nf IRR", "replies": [], "depth": 2}], "depth": 1}, {"id": "f0spbfk", "text": "Well first of all opportunity cost is not part of IRR so that\u2019s just to throw you off.  You use opportunity cost to see if the IRR is high enough to make the project worth it.  You don\u2019t use it to calculate IRR.  So figure out how much you have in the project every year.  First year it\u2019s 1000000, 2nd year it\u2019s 950000 (1000000-50000), 3rd year it\u2019s 890000 (950000-51000), etc etc.  Then figure out how much total gain you\u2019re getting out of this deal.  Then figure out the IRR you\u2019d have to have to reach That number with 1m for 1 year and 950k for year 2 and 890k for the 3rd year, etc etc.  so something like this...\n\n1000000*IRR+950000*IRR+890000*IRR...... for all years... =profit\n\nSolve for IRR", "replies": [{"id": "f0uqi5l", "text": "thank you", "replies": [{"id": "f0uuhfr", "text": "Was that actually helpful? I just read that a bunch of times and I have no idea what they\u2019re saying. Do you have a financial calculator? It\u2019s super simple if you do, and I can\u2019t imagine anyone asking an IRR question and you weren\u2019t allowed to use a financial calculator.", "replies": [{"id": "f0v0g4o", "text": "I don't have one but have an online emulator, yes I could use it but I was just genuinely confused by the question", "replies": [{"id": "f0v6s7e", "text": "yeah sorry... that answer was a mess but it looked like it was a test question so I figured \"use IRR on a calculator\" wasn't going to cut it.  Maybe this will answer it better on a conceptual level.  Think of it as if the original investment was compounded for the whole time and then back out the money you got paid out....\n\nThe equation for IRR is\n\n0=-P0 + P1/(1+IRR) + P2/(1+IRR)\\^2 + P3/(1+IRR)\\^3 + P4/(1+IRR)\\^4  etc etc + Pn/(1+IRR)\\^n\n\nif you multiply both sides by -(1+IRR)\\^n you get...\n\n0 = P0\\*(1+IRR)\\^n - P1\\*(1+IRR)\\^(n-1) - P2\\*(1+IRR)\\^(n-2)... etc etc... + Pn\n\n0 = 1000000\\*(1+IRR)\\^5 - 50000\\*(1+IRR)\\^4 - 51000\\*(1+IRR)\\^3 - 52000\\*(1+IRR)\\^2 - 53000\\*(1+IRR) - 500000\n\nSo if you look at that then the first term is the what you would have if you took all your seed money (1000000) and compounded it n times (earned IRR return for 5 years).  But you got some of the money back during those 5 years so that amount you got back shouldn't be compounded over and over again... so the money you got back in year 1 (50000) should be backed out of that 1000000 compounded 5 years so that's the 2nd term (-50000\\*(1+IRR)\\^4.  You're removing the 4 years worth of that 50k compounding because that 50k was only producing IRR returns that first year.\n\nThe second year another 51000 is paid out so your return isn't working on that 51000 for 5 years so back that out.... -51000\\*(1+IRR)\\^3.... because the 51000 was only compounding for 2 years....  and so on and so on.\n\nMaybe that's easier to understand.... IDK...  The IRR is buried in a bunch of exponents so solving it is a giant pain which is why \"use a financial calculator's IRR function\" is probably a good enough answer for people who aren't quants.  To actually solve it by hand you'd have to iterate over a whole bunch of possible IRRs to find the right solution.", "replies": [{"id": "f0wc1yp", "text": "great detailed answer thank you.  I'm going to need to take a tutorial on just using the damn calculator, lol.", "replies": [], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}]