Microsoft Office Tutorials and References
In Depth Information
Using the IRR Function
following formula (in cell C25) returns $10,923.24, which is the payment amount that would
substitute for the varying payment amounts in column B:
=PMT(C5,C4,–B23,0,C6)
Figure 12-11: Calculating equivalent payments with NPV.
Using the IRR Function
Excel’s IRR function returns the discount rate that makes the NPV of an investment zero. In other
words, the IRR function is a special-case NPV.
The syntax of the IRR function is
IRR(range,guess)
The range argument must contain values. Empty cells are not treated as zero. If the
range contains empty cells or text, the cells are ignored.
In most cases, the IRR can be calculated only by iteration. The guess argument, if supplied, acts
as a “seed” for the iteration process. It has been found that a guess of –90% will almost always
produce an answer. Other guesses, such as 0, usually (but not always) produce an answer.
 
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