Skip to content
xlsoffice. All Rights Reserved
  • Home
  • Excel For Beginners
  • Excel Intermediate
  • Advanced Excel For Experts

Lookup and Reference Examples

  • Count rows with at least n matching values
  • How to get address of last cell in range in Excel
  • How to use Excel MMULT Function
  • To count total rows in a range in Excel
  • Basic INDEX MATCH approximate in Excel

Data Analysis Examples

  • Managing Conditional Formatting Rules in Excel
  • Get column index in Excel Table
  • How To Compare Two Lists in Excel
  • How to Create Gantt Chart in Excel
  • Everything about Charts in Excel

Data Validation Examples

  • Excel Data validation whole percentage only
  • Excel Data validation must not contain
  • Data validation must not exist in list
  • Excel Data validation exists in list
  • Excel Data validation don’t exceed total

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:

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

Next Post:

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

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
  • How to extract multiple lines from a cell in Excel
  • Complete List of Excel Text Functions References and Examples
  • Remove unwanted characters in Excel
  • How to count specific words in a range in Excel
  • CONCATENATE function: Description, Usage, Syntax, Examples and Explanation
  • Convert Unix time stamp to Excel date
  • WORKDAY function: Description, Usage, Syntax, Examples and Explanation
  • NETWORKDAYS.INTL function: Description, Usage, Syntax, Examples and Explanation
  • Sum race time splits in Excel
  • Display the current date and time in Excel
  • DISC function: Description, Usage, Syntax, Examples and Explanation
  • DDB function: Description, Usage, Syntax, Examples and Explanation
  • XIRR function: Description, Usage, Syntax, Examples and Explanation
  • AMORDEGRC function: Description, Usage, Syntax, Examples and Explanation
  • Calculate periods for annuity in Excel
© 2022 xlsoffice . All Right Reserved. | Teal Smiles