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irr - Internal rate of return

Syntax 

Return = irr(CashFlow)

Description

Return = irr(CashFlow) calculates the internal rate of return for a series of periodic cash flows. CashFlow is the cash flow vector. The first entry in CashFlow is the initial investment. If the initial investment is negative, irr generates a unique result only if all subsequent cash flows are positive. If some future cash flows are negative, irr generates nonunique solutions (multiple solutions that are each valid).

If the cash flow payments are monthly, multiply the resulting rate of return by 12 for the annual rate of return. This function calculates only positive rates of return; for nonpositive rates of return, Return = NaN.

Examples

This cash flow represents the yearly income from an initial investment of $100,000:

Year 1

$10,000

Year 2

$20,000

Year 3

$30,000

Year 4

$40,000

Year 5

$50,000

To calculate the internal rate of return on the investment

Return = irr([-100000  10000  20000  30000  40000  50000])

returns

Return =

         0.1201 (12.01%)

References

Brealey and Myers, Principles of Corporate Finance, Chapter 5

See Also

effrr, mirr, nomrr, taxedrr, xirr

  

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