This Excel tutorial explains how to use the Excel IRR function with syntax and examples.
Description
The Microsoft Excel 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 IRR function is a built-in function in Excel that is categorized as a Financial Function. It can be used as a worksheet function (WS) and a VBA function (VBA) in Excel. As a worksheet function, the IRR function can be entered as part of a formula in a cell of a worksheet. As a VBA function, you can use this function in macro code that is entered through the Microsoft Visual Basic Editor.
Syntax
The syntax for the IRR function in Microsoft Excel is:
Parameters or Arguments
- range
- A range of cells that represent the series of cash flows.
- estimated_irr
- Optional. It is your guess at the internal rate of return. If this parameter is omitted, it assumes an estimated_irr of 0.1 or 10%.
The internal rate of return (IRR) for a project can be defined as the discount rate that offers zero net present value (NPV) or the rate where the present value of the initial investment or cash outflows is the same amount as the present value of the future cash inflows that are associated with a project. The XIRR function calculates in the internal rate of return for series of cash flows that occur at irregular intervals. To calculate the internal rate of return for a series of regular, periodic cash flows, use the IRR function. Payments are expressed as negative values and income as positive values.
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.
Irr To Work In Excel Spreadsheet
Applies To
- Excel for Office 365, Excel 2019, Excel 2016, Excel 2013, Excel 2011 for Mac, Excel 2010, Excel 2007, Excel 2003, Excel XP, Excel 2000
Type of Function
- Worksheet function (WS)
- VBA function (VBA)
Irr To Work In Excel Sheet
Example (as Worksheet Function)
Let's look at some Excel IRR function examples and explore how to use the IRR function as a worksheet function in Microsoft Excel:
Based on the Excel spreadsheet above:
Irr Calculator Excel
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.
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.
Example (as VBA Function)
The IRR function can also be used in VBA code in Microsoft Excel.
Let's look at some Excel IRR function examples and explore how to use the IRR function in Excel VBA code:
How To Irr In Excel
In this example, the variable called LNumber would now contain the value of 0.276668413.