The formula for the IRR calculation is:
MVE = MVB x (1 + IRR) + CF1 x (1 + IRR) W1 … + CFn x (1+ IRR) Wn
where:
MVE is market value ending
MVB is market value beginning
IRR is internal rate of return
CF is cash flow amount
W is weight (Number of Days Cash Flow is Present) / (Num of Days in Period)
The time-of-day assumption is important to determine the proper weight. Below are the most common assumptions:
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