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Internal finance |
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Internal financeFinance generated within a firm by retained earnings and depreciation.Internal finance Similar MatchesInternal expansionInternal expansionGrowth of assets resulting from internal financing or internally generated cash flow. Internally efficient marketInternally efficient marketSee: Operationally efficient market Internal balanceInternal balanceA target level for domestic aggregate economic activity, such as a level of GDP that minimizes unemployment without being inflationary. See the assignment problem. Contrasts with external balance. Internal rate of returnInternal rate of returnThe interest rate which, when used as the discount rate for a series of cash flows, gives a net present value of zero.To understand this, remember the fundamental concept that £1 received in ten years is not worth as much as £1 received now, because £1 received now can be invested for ten years and compound into a higher amount.So if you are a project financier, and you are considering the viability of a project that requires up front capital expenditure, which will be recouped by net cash inflows in years 3, 4 and 5, you have to discount the earnings in those later years to establish their net present value. The discount you apply is the crucial thing, but the IRR gives you a starting point -it is the discount rate at which the project will break even.If you apply a discount rate to future cashflows that is higher than the IRR, the project will make a loss in real terms. If you apply a discount that is lower than the IRR, the project will be profitable. InternalizeInternalizeTo cause, usually by a tax or subsidy, an external cost or benefit of someone's actions to be experienced by them directly, so that they will take it into account in their decisions. Further SuggestionsInternal Revenue CodeInternal Revenue Service Restructuring and Reform Act of 1998 Portfolio internal rate of return Internal economies of scale Internal Revenue Service (IRS) Internal measure Internal growth rate Incremental internal rate of return Internal Revenue Service |
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