Internal Rate of Return (IRR)
Syntax: IRR(Cash Flows; Guess)
The IRR function computes the internal rate of return for a given amount of initial investment and a series of cash flows. For example, if you invest $25,000 in a coffee shop and want to know the internal rate of return for this investment (based on the fact that you received $30,000, $40,000, $28,000, and $12,000 in return over four years), you should put –$25,000 (the initial investment) into one cell and all of the income, without the minus sign, in cells below or to the right. If your values are in cells B212:B216, you can type the following formula:
=IRR(B212:B216)
The answer is 120.23%.
Figure 8-7. Sample result of the IRR function
Not bad for a coffee shop. The guess
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