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IRR

The IRR function returns the internal rate of return on an investment based on a series of periodic cash flows.

This function helps investors evaluate the feasibility of an investment by comparing the actual rate of return with the required rate of return.

Syntax​

IRR(cashflow_amounts, [rate_guess])

ArgumentDescriptionPermitted values
cashflow_amountsAn array or range with the investment income or expenses. The argument must contain at least one positive and one negative valueRange of cells or array of numbers
[rate_guess](optional) Expected internal rate of return value. If the argument is omitted, it defaults to 0.1Positive number or a reference to a cell containing a number

Examples of use​

Simple IRR calculation

=IRR(A1:A5)

If cells A1:A5 contain the following cash flows: [-1000, 300, 400, 500, 600], the function will calculate the internal rate of return for this project.

Result: approximately 0.248.

Use with initial assumption

=IRR(A1:A5, 0.2)

Here, 0.2 (or 20%) is used as the initial assumption for IRR.

Result: approximately 0.25.

Notes​

  • The cashflow_amounts argument must contain at least one negative and one positive value for the calculation to be correct.
  • If the result of the IRR function is higher than the required rate, the project is considered to be attractive.
  • If the function cannot find a solution, it will return the #VALUE! error.