How to calculate combined IRR for two different cost of funds? The emi (Equated Monthly Installment) amount, whether it is calculated separately or based on the combined IRR should be same. I tried using weighted average for combining the IRRs but difference is arising in EMI amount.

Cost 1 $600000

Interest - 8% P.A

Cost 2 $400000

Interest - 14% P.A

Period - 24 months

EMI 1 $27136.37

EMI 2 $19205.15

Total - $46341.53

I calculated weighted average by (600000*8%+400000*14%)/(600000+400000)

Weighted IRR is 10.40%

EMI based on weighted IRR is 46329.76

Difference of 11.76.

Please provide a formula for calculation of combined IRR for (1000000) which should provide the same EMI amount of 46341.53.

  • 1
    $\begingroup$ Most likely there is no such combination formula. The new IRR has to be computed from scratch, not by combining the two IRRs. $\endgroup$ – Alex C May 13 '19 at 14:27
  • $\begingroup$ Can you suggest any Methods to compute IRR. So that the EMI amount is $46341.53 $\endgroup$ – Rag May 15 '19 at 6:36

The sum of 2 annuities of the same length is still an annuity.

You have a monthly annuity with PV = 600000+400000 = 1000000

Number of payments N = 24

Amount of monthly payment PMT = 27136.37+19205.15 = 46341.53

Then using the RATE(N,-PMT,PV)*12 function in Excel or similar Annuity function in a financial calculator you find the IRR to be 10.42543%


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