IRR

Description

Internal rate of return (IRR) is a metric of profitability for potential investments. Internal rate of return is a discount rate that sets the net present value (NPV) of all future cash flows the investment equal to zero. An approximate solution is found using numerical iteration.

Signature

IRR(Node [, Guess])


Parameters

  • Node: Yearly Cash Flows. At least one of the cash flows must be negative and at least one positive.
  • Guess: (optional, defaults to 10%) is a first guess at the rate.

Example

We have project with following cash-flows.

'CF'=

Year CF
2018 -10000
2019 1155
2020 5000
2021 7000

Our goal is to find a discount rate with which  the discounted cash flows sum-up to zero:

IRR('CF')=

Year Totals
2020 -23%
2021 12%

The IRR function tells us the rate is 12%. The result for Cash Flows up to year 2020 is not interesting for us and can be filtered out with FILTER function.




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