Excel IRR function

Function: IRR

Description: Excel IRR function (Internal Rate of Return) 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.

The syntax for the IRR function is as follows:

Syntax: IRR(values, [guess])

Where:

• values: An array or a reference to a range of cells that contains the investment’s cash flows. The first value in the array represents the initial investment.
• [guess]: Optional. An initial guess at the internal rate of return. If this value is not specified, it is assumed to be 10%.

Examples:

To calculate the internal rate of return of an investment that receives cash flows of -$1,000 in year 0, $500 in year 1, $1,000 in year 2, and $1,500 in year 3, you can use the following formula:

=IRR({-1000, 500, 1000, 1500})