Internal Rate of Return

Example: Internal Rate of Return

A farmer buys 10 young cows and a bull for $4500. The first year he does not expect to sell any calves, he just expects to feed them. Thereafter, he expects to be able to sell calves to offset the cost of feed. He expects them to be productive for 9 years, after which time he will liquidate the herd. The internal rate of return is computed after 9 years.

import com.imsl.finance.*;
import java.text.NumberFormat;

public class irrEx1 {
    public static void main(String args[]) {
        double[] pmt = {-4500., -800., 800., 800., 600., 600.,
        800., 800., 700., 3000.};
        
        double irr = Finance.irr(pmt);
        NumberFormat nf = NumberFormat.getPercentInstance();
        nf.setMaximumFractionDigits(2);
        System.out.println("After 9 years, the internal rate of return on " +
        "the cows is " + nf.format(irr));
    }
}

Output

After 9 years, the internal rate of return on the cows is 7.21%

Link to Java source.