Internal rate of return (IRR) is a metric of profitability for potential investments. Internal rate of return is a discount rate that sets the net present value (NPV) of all future cash flows the investment equal to zero. An approximate solution is found using numerical iteration.
Signature
IRR(Node [, Guess])
Parameters
Node: Yearly Cash Flows. At least one of the cash flows must be negative and at least one positive.
Guess: (optional, defaults to 10%) is a first guess at the rate.
Example
We have project with following cash-flows.
'CF'=
Year
CF
2018
-10000
2019
1155
2020
5000
2021
7000
Our goal is to find a discount rate with which the discounted cash flows sum-up to zero:
IRR('CF')=
Year
Totals
2020
-23%
2021
12%
The IRR function tells us the rate is 12%. The result for Cash Flows up to year 2020 is not interesting for us and can be filtered out with FILTER function.
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