So if money earns no interest on the money, you're on the right track, but

then life is very easy.

We don't need to do most of this class.

Turns out,

the IRR will be < 5%.

I can guess that simply because I know there's compounding, and

the actual answer is probably 4.9 or something like that.

It'll be slightly less than 10%.

So I want to do this in a calculator, but before I do that,

let's just stare at the generic formula.

IRR is the rate that solves the following equation.

Where I0 = C1 plus C2.

I would rewrite it, if I may,

in a slightly different way,

where NPV = (I0) + all this junk = 0.

So equating (I0) to the right-hand side, if I take (I0) to the right-hand side,

it becomes NPV formula, and then you force it to be equal to 0.

So let me ask you this.

In that period, how many cash flows were there?

Nothing here, 110 here.

Now you could have many more cash flows.

The problem is, from being a quadratic problem, it becomes a problem like which

E=MC2 was cool for Einstein because he stopped at square, but when he saw N,

he said, man, this is too cool, this is just too much mind-boggling.

And it is.

The power of compounding now is in reverse, it's in the denominator.

We did future value and

now trying to figure out present value is a tough thing to do.

So what I want to do now is take that problem, simple problem, and

do some calculations on the calculator.

So, let's go on a tab and

let's keep those numbers there.