What is IRR
The abbreviation ‘IRR’ stands for internal rate of return, it is the interest rate at which net present value of an investment with both negative and positive cash flows equals to zero.
Use of the XIRR function
The XIRR function calculates the internal rate of return for an investment having cash flows occurring at irregular intervals. It is a Financial function, which first introduced in Excel 2007 version.
For periodic cash flows of investment, IRR function is used to calculate the internal rate of return.
XIRR(values, dates, [guess])
The XIRR function has the followings arguments:
values – Required. The project’s cash flows occurring at irregular intervals, having both negative and positive values.
dates – Required. The series of dates, corresponding to the supplied cash flows (values). The first date on which the investment is made or loan is obtained, subsequent dates on which remaining payments will be made e.g. in case of the investment, income will be received. Therefore, subsequent dates must be after the first date.
[guess] – Optional. A number you suggest close to the result of XIRR. If omitted, it is assumed to be 10%.
|#NUM!||If supplied cash flows miss either negative or positive value.|
|#VALUE||If subsequent dates are before the first date of investment.|
|If any supplied date is invalid.|
IRR function calculates the internal rate of return for an investment having subsequent cash inflows occurring at regular intervals, such as monthly or annually.