Excel 2013 Tutorial - How to Calculate an Internal Rate of Return
In this tutorial you will learn :
How to Calculate an Internal Rate of Return.
You can use the Excel IRR function to calculate the internal rate of return of future cash flows. IRR is very closely related to NPV(Net Present Valur) . IRR computes the rate of return that causes the NPV of those same cash flows to be exactly zero.
An alternative is to calculate the Non periodic future cash flows.
In the first case the future cash flows are assumed to be at regular intervals. That may not always be the case, though. For cash flows at irregular intervals, Excel provides the XIRR function.
XIRR requires one more argument than IRR does: dates. IRR doesn’t need to know the dates because it assumes that the cash flows are the same distance apart. Whether they are one day or one year apart, IRR doesn’t care. The rate it returns will be consistent with the cash flows. That is, if the cash flows are annual, the rate will be an annual rate.