Microsoft Office Tutorials and References
In Depth Information
Using the IRR Function
Figure 12-13: Using the IRR function to calculate geometric average growth.
Checking results
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:
=NPV(D3,B7:B14)+B6
The internal rate of return is calculated in cell B17:
=IRR(B6:B14,–90%)
 
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