IRR Calculation

Question:     How do I calculate the interest rate received for an investment consisting of payments (negative values) and income (positive values) that occur at regular periods?

Answer:        By using the internal rate of return (IRR)

Why:        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.

Applies To: Excel 2003, 2007 and 2010

1.            Reference is made to the example in the following screen shot

2.         To calculate the IRR select cell B10 and type; =IRR (B5:B9).The answer will be 18%.  That is the interest rate received for the investment

Syntax   IRR (Values, [guess])

Values    Required. 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.

Guess Optional. A number that you guess is close to the result of IRR.

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