The IRR function
Returns the internal rate of return of a series of cash flows, the discount rate at which their net present value is 0.
Syntax
IRR(values, [guess])- values
- The cash flows in order, one per period, with at least one negative (the investment) and one positive.
- guess (optional)
- A starting guess for the rate. Leave it out for 10%.
Examples
D1=IRR(B1:B4)
| A | B | C | D | |
|---|---|---|---|---|
| 1 | Year 0 | -1000 | 0.09701 | |
| 2 | Year 1 | 400 | ||
| 3 | Year 2 | 400 | ||
| 4 | Year 3 | 400 |
B1=IRR({-100;110})
| A | B | |
|---|---|---|
| 1 | 0.1 |
Practice IRR
Questions
What is the difference between IRR and NPV?
NPV gives an amount at a discount rate you choose. IRR gives the rate at which that amount is exactly 0. A project is worth doing at your required rate if its IRR is higher than that rate.