Excel: Irr Function

In Excel, the Irr function returns the internal rate of return for a series of cash flows. The cash flows must occur at regular intervals, but do not have to be the same amounts for each interval.

The syntax for the Irr function is:

Irr( range, estimated_irr )

range is a range of cells that represent the series of cash flows.

estimated_irr is optional. It is the your guess at the internal rate of return. If this parameter is omitted, the Irr function assumes an estimated_irr of 0.1 or 10%.

Note:

Excel tries to recalculate the Irr until the result is accurate within 0.00001 percent. If after 20 tries Excel has not calculated an accurate value, it will return the #NUM! error.

Applies To:

Excel 2007, Excel 2003, Excel XP, Excel 2000

For example:

Let's take a look at a few examples:

Based on the Excel spreadsheet above:

This first example returns an internal rate of return of 28%. It assumes that you start a business at a cost of $7,500. You net the following income for the first four years: $3,000, $5,000, $1,200, and $4,000.

=Irr(A1:A5)

This next example returns an internal rate of return of 5%. It assumes that you start a business at a cost of $10,000. You net the following income for the first three years: $3,400, $6,500, and $1,000.

=Irr(B1:B4)

VBA Code

The Irr function can also be used in VBA code. For example:

Dim LNumber As Double
Static Values(5) As Double

Values(0) = -7500
Values(1) = 3000
Values(2) = 5000
Values(3) = 1200
Values(4) = 4000

LNumber = Irr(Values())

In this example, the variable called LNumber would now contain the value of 0.276668413.