Skip to content
Free Excel Tutorials
  • Home
  • Excel For Beginners
  • Excel Intermediate
  • Advanced Excel For Experts

Data Analysis

  • Number and Text Filters Examples in Excel
  • Remove Duplicates Example in Excel
  • Error Bars in Excel
  • How to do a t-Test in Excel?
  • How To Load Analysis ToolPak in Excel

References

  • Two-way lookup with VLOOKUP in Excel
  • Count rows with at least n matching values
  • LOOKUP function: Description, Usage, Syntax, Examples and Explanation
  • Last row number in range
  • Find Closest Match in Excel Using INDEX, MATCH, ABS and MIN functions

Data Validations

  • Excel Data validation must not contain
  • Excel Data validation allow uppercase only
  • Excel Data validation unique values only
  • Prevent invalid data entering in specific cells
  • Excel Data validation date in specific year

IRR function: Description, Usage, Syntax, Examples and Explanation

by

What is IRR function in Excel?

IRR function is one of the Financial functions in Microsoft Excel that returns the internal rate of return for a series of cash flows represented by the numbers in values. These cash flows do not have to be even, as they would be for an annuity. However, the cash flows must occur at regular intervals, such as monthly or annually. The internal rate of return is the interest rate received for an investment consisting of payments (negative values) and income (positive values) that occur at regular periods.

Syntax of IRR function

IRR(values, [guess])

The IRR function syntax has the following arguments:

  • Values: An array or a reference to cells that contain numbers for which you want to calculate the internal rate of return.
    • Values must contain at least one positive value and one negative value to calculate the internal rate of return.
    • IRR uses the order of values to interpret the order of cash flows. Be sure to enter your payment and income values in the sequence you want.
    • If an array or reference argument contains text, logical values, or empty cells, those values are ignored.
  • Guess (Optional): A number that you guess is close to the result of IRR.
    • Microsoft Excel uses an iterative technique for calculating IRR. Starting with guess, IRR cycles through the calculation until the result is accurate within 0.00001 percent. If IRR can’t find a result that works after 20 tries, the #NUM! error value is returned.
    • In most cases you do not need to provide guess for the IRR calculation. If guess is omitted, it is assumed to be 0.1 (10 percent).
    • If IRR gives the #NUM! error value, or if the result is not close to what you expected, try again with a different value for guess.

IRR formula explanation

IRR is closely related to NPV, the net present value function. The rate of return calculated by IRR is the interest rate corresponding to a 0 (zero) net present value. The following formula demonstrates how NPV and IRR are related:

NPV(IRR(A2:A7),A2:A7) equals 1.79E-09 [Within the accuracy of the IRR calculation, the value is effectively 0 (zero).]

Example of IRR function

Steps to follow:

1. Open a new Excel worksheet.

2. Copy data in the following table below and paste it in cell A1

Note: For formulas to show results, select them, press F2 key on your keyboard and then press Enter.

You can adjust the column widths to see all the data, if need be.

Data Description
-$70,000 Initial cost of a business
$12,000 Net income for the first year
$15,000 Net income for the second year
$18,000 Net income for the third year
$21,000 Net income for the fourth year
$26,000 Net income for the fifth year
Formula Description Result
=IRR(A2:A6) Investment’s internal rate of return after four years -2.1%
=IRR(A2:A7) Internal rate of return after five years 8.7%
=IRR(A2:A4,-10%) To calculate the internal rate of return after two years, you need to include a guess (in this example, -10%). -44.4%

Post navigation

Previous Post:

DCOUNT function: Description, Usage, Syntax, Examples and Explanation

Next Post:

Customize Ribbon In Excel

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Learn Basic Excel

Ribbon
Workbook
Worksheets
Format Cells
Find & Select
Sort & Filter
Templates
Print
Share
Protect
Keyboard Shortcuts

Categories

  • Charts
  • Data Analysis
  • Data Validation
  • Excel Functions
    • Cube Functions
    • Database Functions
    • Date and Time Functions
    • Engineering Functions
    • Financial Functions
    • Information Functions
    • Logical Functions
    • Lookup and Reference Functions
    • Math and Trig Functions
    • Statistical Functions
    • Text Functions
    • Web Functions
  • Excel VBA
  • Excel Video Tutorials
  • Formatting
  • Grouping
  • Others

Logical Functions

  • OR function: Description, Usage, Syntax, Examples and Explanation
  • How to use Excel NOT Function
  • TRUE function: Description, Usage, Syntax, Examples and Explanation
  • NOT function: Description, Usage, Syntax, Examples and Explanation
  • Complete List of Excel Logical Functions, References and Examples

Date Time

  • Check If Two Dates are same month in Excel
  • Count birthdays by month in Excel
  • Get fiscal year from date in Excel
  • How to calculate quarter from date in Excel
  • How to get year from date in Excel

Grouping

  • Group numbers with VLOOKUP in Excel
  • Running count group by n size in Excel
  • Map text to numbers in Excel
  • Group times into unequal buckets in Excel
  • If cell contains one of many things in Excel

General

  • How to generate random number weighted probability in Excel
  • 231 Keyboard Shortcut Keys In Excel
  • How to get amount with percentage in Excel
  • Create dynamic workbook reference to another workbook in Excel
  • Delete Blank Rows at Once in Excel
© 2023 xlsoffice . All Right Reserved. | Teal Smiles | Abbreviations And Their Meaning