Probably a simple answer, but I don't seem to get it. I've always been taught the IRR is the equivalent of the rate i'd get if I invest the same amount at a bank. (Or the % I need to compare my investment to a loan).
Now, calculating it in Excel gives me results I don't understand. Let's assume (i'm working on energy saving projects) I install solar panels: Investment: 8000 € Yearly income 1500 €
That's a Payback Time of 5,3 yrs
Now, over a period of 10, Excel calculates an IRR of 13% Cashflow wise, i have 15000 € in hand at the end of the 10 yrs....Which is nowhere close to the 13% of course, but rather around 6,5 % interest rate If I had invested the 8000 € @ 13% in a bank I'd have 27157 € in hand. As seen in my Excel
Now, if i take a loan for the 8000 € investment, I could will always make profit as long as I don't exceed the rate of the IRR. I guess this is the "cost of capital" which I've heard about.
Is there a financial tool/concept which calculates or compares my investment in solar panels to an investment in a bank. I guess the main difference is you don't keep you capital which you have invested when you pay for something like solar panels.
Any help welcome, thanks.