Join Curt Frye for an in-depth discussion in this video XIRR: Calculating internal rate of return for irregular cash flows, part of Excel 2010: Financial Functions.
Many businesses use cash flows from several sources to fund other investments.…These revenues don't always come in on a regular monthly or annual schedule so…you can't use the IRR function to calculate internal rate of return.…However, you can use the XIRR function to calculate the internal rate of return…for cash flows that occur at irregular intervals.…The XIRR function has three arguments.…The first is the cash flows themselves, so we have those in cells B5 to B12.…
The next are the dates when those cash flows occur and those are in cells C5 to C12.…Now the third and final argument is your guess at the internal rate of return…and I have it here in cells C2.…Excel uses this as a basis for its calculations because it goes through…iteration to find the internal rate of return for these cash flows.…If you leave the guess argument blank, Excel guesses 10% and that's good in most cases.…I just put it in here as 5% to give you a visual aid of what it would look like…when we put it into the formula.…
- 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
Q: Where can I learn more about Excel formulas?
A: Discover more on this topic by visiting Excel formulas on lynda.com.
Managing and Analyzing Data in Excel 2010with Dennis Taylor1h 32m 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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