Join Curt Frye for an in-depth discussion in this video IRR: Calculating internal rate of return, part of Excel 2010: Financial Functions in Depth.
Calculating an investment's internal rate of return lets you identify the…interest rate at which your investment would have a net present value of zero.…In other words, your formula tells you that discount rate at which you would…break even on a given investment.…If the formula, which uses the IRR function, returns a value greater than the…interest rate generated by risk-free investments such as T-Bills, then you…should make the investment. If not, you should pass.…The IRR function has two arguments: a range of values that reflect future cash…flows and optionally a guess at the rate of return.…
Excel starts it's guessing with the rate of 10%, which will work in most cases.…The cash flows may either be positive, which is income, or negative, which is an…expense, but they must all occur at regular intervals such as either every…month or every year.…So let's go ahead and compare these two investments.…The first has a $100,000 buy-in and then payments of 20, 20, 20, and $40,000…totaling 120 over the course of five years, and then the second investment also…
- Analyzing loans, payments, and interest
- Discovering the interest rate of an annuity
- Determining depreciation using the straight line, declining balance, double-declining balance, and other methods
- Calculating the future value of an investment with variable returns
- Finding the discount rate of a security
- Converting between fractional prices and decimal prices
- Determining the yield of securities that pay interest periodically
Skill Level Intermediate
Managing and Analyzing Data in Excel 2010with Dennis Taylor1h 32m Appropriate for all
Excel 2010: Data Validation in Depthwith Dennis Taylor59m 45s Intermediate
1. Analyzing Loans, Payments, and Interest
2. Calculating Depreciation
3. Determining Values and Rates of Return
4. Calculating Bond Coupon Dates and Security Durations
5. Calculating Security Prices and Yields
6. Calculating Prices and Yields of Securities with Odd Periods
Additional resources1m 5s
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