Microsoft Office Tutorials and References
In Depth Information
Using the IRR Function
Figure 12-13: Using the IRR function to calculate geometric average growth.
Figure 12-14 shows a worksheet that demonstrates the relationship between IRR, NPV, and PV by
verifying the results of some calculations. This verification is based on the definition of IRR: The
rate at which the sum of positive and negative discounted flows is 0.
Figure 12-14: Checking IRR and NPV using sum of PV approach.
The NPV is calculated in cell B16:
The internal rate of return is calculated in cell B17: