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Financial function
IRR
Returns the internal rate of return of a series of cash flows.
Very commonDifficulty 1400 · AdvancedUsage rank #80 of 520
When to use it
The discount rate at which a series of periodic cash flows has zero net present value. The return a project earns.
The shape of it
- Syntax
=IRR(values, [guess])
Worked examples
Project return
=IRR({-1000,300,400,500}) → 8.90%
An outlay then three inflows.
From a range
=IRR(B2:B6) → 14.2%
Flows in a column, first one negative.
With a guess
=IRR(B2:B6,0.2) → 14.2%
A guess helps when the default search fails.
Worth knowing
- The range must include the initial outflow as a negative.
- Flows must alternate at least once between negative and positive.
- Compare with the cost of capital; MIRR is more realistic about reinvestment.
- Periods must be equal; XIRR for dated flows.
Where it goes wrong
- #NUM! when no sign change or the search fails; try a guess.
- Multiple sign changes can give several valid IRRs; the function returns one.
Related
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