From the course: Financial Modeling Foundations

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IRR decisions in financial models

IRR decisions in financial models

From the course: Financial Modeling Foundations

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IRR decisions in financial models

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- [Lecturer] Making decisions in business is the point of building financial models. And Excel has great tools to make this easier. I'm in the 06_05Begin Excel file. Now we're trying to decide whether or not we should make a particular investment. And so we're gonna rely on a metric called IRR or internal rate of return. And in particular we're looking at doing an LBO or leveraged buyout for the firm. And to do that, we've got this LBO model here and we make various assumptions, but based on those assumptions, like as an example, the level of debt we're gonna use, we are going to do an IRR or internal rate of return calculation. So essentially Excel goes through and in our model, we build out what our expected free cash flows are for this particular enterprise. Okay? And we could see where this comes from, as an example, using our trace dependence and precedence tool, if we wanted to, for instance, unsurprisingly,…

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