From the course: Google Sheets: Advanced Formulas and Functions

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Calculate the internal rate of return (IRR) of an investment

Calculate the internal rate of return (IRR) of an investment - Google Sheets Tutorial

From the course: Google Sheets: Advanced Formulas and Functions

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Calculate the internal rate of return (IRR) of an investment

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- [Instructor] Calculating an investment's internal rate of return enables you to identify the interest rate at which the investment's future cash flows have a net present value of zero. In other words, your formula tells you the discount rate at which you would break even on a given investment. If the IRR formula returns a value greater than the interest rate generated by risk-free investments, you should take the plunge. If not, then you should pass on the opportunity. This workbook contains a single worksheet, and it contains some information regarding two investments. I'll look at the investment cash flows first and then get back to what guess is at the top of the worksheet. These two investments will return a series of cash flows over the course of five years. You can see here that for investment one we start out by investing $100,000, and then we receive cash flows of $20,000 a year for the first four years, followed by a cash flow of 40,000 in year five. So that's a total of…

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