Excel IRR Function

This post will guide you how to use Excel IRR function with syntax and examples in Microsoft excel.

Description

The Excel IRR function returns the internal rate of return for a series of cash flows and the cash flows must be occurred at regular intervals (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 IRR function is a build-in function in Microsoft Excel and it is categorized as a Financial Function.

The IRR function is available in Excel 2016, Excel 2013, Excel 2010, Excel 2007, Excel 2011 for Mac.

Syntax

The syntax of the IRR function is as below:

`=IRR(values, [guess])`

Where the IRR function arguments are:

• Values -This is a required argument. An array or cell reference that contain numbers for which you want to calculate the internal rate of return. And the values must include at least one positive value and one negative value.
• Guess – This is an optional argument. An initial guess at the internal rate of return. If it is omitted, and it will be set as 0.1 or 10%.

Note:

• 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).]

Excel IRR Function Examples

The below examples will show you how to use Excel IRR Function to calculate the internal rate of return for a series of cash flows.

#1 to get the investment’s internal rate of return after 3 years, using the following formula:

`=IRR(B1:B4)`

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