Please Note: This article is written for users of the following Microsoft Excel versions: 97, 2000, 2002, and 2003. If you are using a later version (Excel 2007 or later), this tip may not work for you. For a version of this tip written specifically for later versions of Excel, click here: Using the XIRR Function.

Using the XIRR Function

by Allen Wyatt
(last updated April 26, 2014)

1

In other issues of ExcelTips you discover how you can use the IRR function to calculate the internal rate of return for a series of values. Excel provides another function, XIRR, that is closely related to IRR. The XIRR function is used to determine the internal rate of return when there are a number of irregular payments associated with an investment. The XIRR function is provided as part of the Analysis ToolPak add-in.

By definition, an internal rate of return is the interest rate accrued on an investment consisting of a series of payments and income that occur over the life of the investment. The XIRR function is used to determine the IRR when the payments and income are made at different periods. In the values provided to the function, you enter payments you make as negative values and income you receive as positive values.

For instance, let's say you are investing in your friend's business, and you are providing the money ($50,000) on November 1. Because of the seasonal nature of your friend's business, the payments are scheduled for March 1, April 1, May 1, June 1, July 1, and August 1 for each of three years. During the first year, payments will be $3,500 each, during the second year they will be $4,250 each, and during the third year they will be $5,000 each.

Since the $50,000 is money you are paying out, it is entered in Excel as a negative value. The other values are entered as positive values. For instance, you could enter –50000 in cell D4, 3500 in cells D5 through D10, 4250 in cells D11 through D16, and 5000 in cells D17 through D22. Similarly you would enter the dates of the payments in column C, just to the left of each exchange of money. To calculate the internal rate of return, you would use the following formula:

=XIRR(D4:D22,C4:C22)

The first range you specify with XIRR is the range of values (cash inflows and outflows) and the second range is the dates associated with those values. The function (in this instance) returns an internal rate of return of 31.2368%.

The ranges you use with the XIRR function must include at least one payment and one receipt. If you get a #NUM error and you have included payments and receipts in the range, then Excel needs more information to calculate the IRR. Specifically, you need to provide a "starting guess" for Excel to work with. For example:

=XIRR(D4:D22,C4:C22,10%)

This usage means that the XIRR function starts calculating at 10%, and then recursively attempts to resolve the XIRR based on the values in the ranges.

ExcelTips is your source for cost-effective Microsoft Excel training. This tip (2503) applies to Microsoft Excel 97, 2000, 2002, and 2003. You can find a version of this tip for the ribbon interface of Excel (Excel 2007 and later) here: Using the XIRR Function.

Author Bio

Allen Wyatt

With more than 50 non-fiction books and numerous magazine articles to his credit, Allen Wyatt is an internationally recognized author. He  is president of Sharon Parq Associates, a computer and publishing services company. ...

MORE FROM ALLEN

Removing All Formatting

Getting rid of formatting from a cell or group of cells can be done using several different techniques. This tip describes ...

Discover More

Out of Memory Errors when Accessing the VBA Editor

It can be frustrating when you get error messages doing something that you previously did with no errors. If you get an out ...

Discover More

Choosing How to Use Multiple Monitors

Do you have multiple monitors (or a projector) hooked up to your system? Here's how to utilize that second display device ...

Discover More

Save Time and Supercharge Excel! Automate virtually any routine task and save yourself hours, days, maybe even weeks. Then, learn how to make Excel do things you thought were simply impossible! Mastering advanced Excel macros has never been easier. Check out Excel 2010 VBA and Macros today!

More ExcelTips (menu)

Selective Summing

If you want to add up the contents of a range of cells based on what is contained in a different range of cells, you need the ...

Discover More

Rounding to the Nearest $50

When preparing financial reports, it may make your data easier to understand if you round it to the nearest multiple, such as ...

Discover More

Rounding by Powers of 10

Need to round a value by a power of 10? You can do it by using the ROUND function as described in this tip.

Discover More
Subscribe

FREE SERVICE: Get tips like this every week in ExcelTips, a free productivity newsletter. Enter your address and click "Subscribe."

View most recent newsletter.

Comments

If you would like to add an image to your comment (not an avatar, but an image to help in making the point of your comment), include the characters [{fig}] in your comment text. You’ll be prompted to upload your image when you submit the comment. Images larger than 600px wide or 1000px tall will be reduced. Up to three images may be included in a comment. All images are subject to review. Commenting privileges may be curtailed if inappropriate images are posted.

What is 6 + 4?

2014-12-20 14:38:52

tom wilson

thanks for the hint where the xiir function is located!


This Site

Got a version of Excel that uses the menu interface (Excel 97, Excel 2000, Excel 2002, or Excel 2003)? This site is for you! If you use a later version of Excel, visit our ExcelTips site focusing on the ribbon interface.

Newest Tips
Subscribe

FREE SERVICE: Get tips like this every week in ExcelTips, a free productivity newsletter. Enter your address and click "Subscribe."

(Your e-mail address is not shared with anyone, ever.)

View the most recent newsletter.