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You Know That When Expanding and Investing in Projects Overseas as Acme Plans to, It Is Essential to Understand Such Things as Return on Equity (Roe) and Internal Rate of Return (Irr). Using Internet Sources

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Return on Equity (ROE) and Internal Rate of Return (IRR) are two very important tools which can be used in decision making in expanding and investing in overseas projects. Return on Equity (ROE) tells how much profit company is generating with shareholder's money. ROE is calculated as:
ROE = Net Income/Shareholder's equity
This net income is income after paying tax and preferred stock dividend but before paying common stock dividend.ROE measures profit generating efficiency of the company. (McClure, 2010) Higher the ROE, better the investment opportunity company is offering.

Advantage of using ROE for investment decision is, it is easy to calculate and it tells how much profit company is generating for share holders. Ultimate goal of a company is to create value for shareholders. Thus, ROE is the right measure to find out if company is efficient in generating profit on its equity (and asset) or not.
However, ROE is not the absolute indicator of investment value. If value of shareholder's equity falls, ROE will go up. Similarly, if company is taking large write-down, ROE will fall sharply. Share buyback also lowers ROE while there is no change in company's operation. (McClure, 2010)

Internal Rate of Return (IRR) is an indicator of yield of an investment.IRR is widely used method in capital budgeting decisions. IRR is the discount rate where total present value of all cash inflows is equal to total present value of all cash outflows. i.e. IRR is the discount rate at which NPV is zero.

Calculation of IRR is complex. To calculate IRR, NPV is equated to zero and r is determined.

NPV = C0 + C1/(1+r) + C2/(1+r)^2 + …. + Cn/(1+r)^n
When we make NPV = 0, value of r is the IRR
Hit and trial method is used to calculate IRR. Even in excel, IRR calculation using formula IRR, gives approximate value.
A project is accepted if its IRR is greater than

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