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When calculating Internal Rate of Return (IRR) for a stock investment,
should the year 3 figure when you sell the stock include the return of
principal as part of the year 3 cash stream)?
Example, you buy stock today for $8, and have three years of dividends of
$1.88/year. In year three you sell the stock for $20. Is the array that
IRR takes as input:
$8 // stock price
$1.88 // year one dividend
$1.88 // year two dividend
$21.88 // $20 sale price + $1.88 year three dividend
should the year 3 figure when you sell the stock include the return of
principal as part of the year 3 cash stream)?
Example, you buy stock today for $8, and have three years of dividends of
$1.88/year. In year three you sell the stock for $20. Is the array that
IRR takes as input:
$8 // stock price
$1.88 // year one dividend
$1.88 // year two dividend
$21.88 // $20 sale price + $1.88 year three dividend