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Rule of 72
Explained
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peakframeworks.com
Rule of 72 (How to Quickly Calculate IRR)
The Rule of 72 is a mathematical formula used to quickly calculate the IRR of an investment. It is essential to know this to do a Paper LBO.
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SOLVED: The Rule of 72 is a simple way to determine how long an investment will take to double given a fixed annual rate of interest. By dividing 72 by the annual rate of return, investors obtain a rough estimate of how many years it will take for the initial investment to duplicate itself. You want to double your initial investment of 5,000. You put your money in a high yield interest-bearing account earning 6% per year. How long will it take to double your money?
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