Microsoft Office Tutorials and References
In Depth Information
l The IRR Function
Arguments dialog box
appears.
7
Click and drag the
cash-flow values
entered in Step 1 or
type the range.
l Optionally, you can
provide an estimated
rate of return just to get
Excel started.
7
8
Click OK.
8
l The cell with the formula displays the
results of the calculations as a percent
with no decimal places.
Repeat Steps 1 to 8 for each set of
anticipated future cash flows.
Did You Know?
The IRR function is related to the Net Present Value
( NPV ) function, which calculates the net present
value of future cash flows. Whereas IRR returns a
percentage — the rate of return on the initial
investment — NPV returns the amount that must
be invested to achieve the specified interest rate.
Caution!
Excel’s IRR function has strict assumptions. Cash
flows must be regularly timed and take place at the
same point within the payment period. IRR may
perform less reliably for inconsistent payments, a mix
of positive and negative flows, and variable interest
rates.
Chapter 2: Work with Formulas and Functions
37

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