IRR Excel function comes more than handy when calculating the internal rate of return (IRR) within a series of cash flows.
The internal rate of return in this case refers to the interest rate applied to an investment, which consists of payments (negative values) and income (positive values) occurring at regular intervals.
As such, the IRR function is particularly important for finance professionals who rely on Excel to work out cash flows on an ongoing basis, whether that’s weekly, monthly or annually. It is often used as a central part of finance modelling projects, supporting businesses that are looking to estimate return on investment and overall profitability.
How to calculate IRR in Excel
The IRR in Excel function can be inputted as a formula within a cell of a spreadsheet. As a VBA function, you can use this function in macro code that is entered through the Microsoft Visual Basic Editor.
The standard syntax for Excel IRR function is written as follows:
=IRR(values, [guess])
The two main arguments for this formula are ‘values’ and ‘guess’. Whereas ‘values’ is a mandatory reference to cells that contain the specific number from which we wish to calculate the IRR, the ‘guess’ is an optional field whereby the user can estimate a number close to their expected result. Excel uses an iterative technique to work out a numeric value that is accurate to within 0.00001%.
Financial modelling support
For any business that relies on Excel as a cornerstone of their operations, it’s crucial to ensure that expert support is on-hand whenever it is needed.
When it comes to effective data management – financial modeling in particular – this is the only way to eliminate any risk of error and ensure all spreadsheets are fully optimised. If resources are not available in-house, an experienced Excel consultant can customise spreadsheets and workbooks to meet the specific needs of the business they are serving.
Want to find out more about Excel’s IRR function and its range of applications? Our team of expert Excel consultants today are here to help on 0161 883 2655.
