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])
Argument |
Description |
Permitted values |
|---|---|---|
cashflow_amounts |
An array or range with the investment income or expenses. The argument must contain at least one positive and one negative value |
Range of cells or array of numbers |
[rate_guess] |
(optional) Expected internal rate of return value. If the argument is omitted, it defaults to 0.1 |
Positive 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.