Any experts on how to calculate this? Basically how much is IRR 14% if $1000 is invested? Estimated term is 7 years

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Very common terminology in Alts. I'm not a fund accountant so someone can explain this better. Annual growth rate. Basically tells you the compound interest yearly. So $100 at 5% IRR is 105 first year. 110.25 next, etc. I think it also includes fees though so once you factor in that and other things it's lower payout.

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Is it 14% per year?

Exactly what I’m trying to figure out. Lol

I’ll send this to someone better with numbers than I am to see if they can figure it out because I definitely can’t, lol.

Does it mean it takes 7 years to get a 14% gain on $1K invested? I don’t know this stuff

Looks like there’s an excel function that can calculate total return. This table and the formula in the same page seemed helpful.

https://www.investopedia.com/terms/i/irr.asp

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It's 14% a year for 7 years but the weird thing about IRR is you have to multiply your return after one year (1140) by 14% return until you get to 7 years -- it is compounding.

I am hoping someone who took Finance courses in undergrad or grad school can pitch in but IRR is no longer a good way to evaluate.

I see it used in conjunction with NPV all the time. It's also how PE firms and VCs measure success. They need to show high IRR of previous funds in order to raise new funds.

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