Excel Internal Rate Return or (IRR) is used commonly in the financial industry to calculate the internal rate of return. Should the IRR be higher than the discounted rate of return, then the investment can be seen as worth the capital.
To calculate the IRR without a financial calculator can take hours. If you however, use the Excel Internal Rate Return function then it can be done within a few seconds.
The formula will for example look like this: =IRR(AR1000:JR1000).
The R stands for Rand. The currency can thus be $ or any other currency as set for the spreadsheet.
Want to learn more about Microsoft Excel? If you prefer attending a course and live in South Africa look at the Johannesburg MS Excel 3 Day Advanced Course or the Cape Town MS Excel 3 Day Advanced training course. If you prefer online learning or live outside South Africa, look at our online MS Excel training courses.
Find the amount to be invested whether once off or as a series. The amount will be the value.
Make an estimation of the investment return. It will be known as the estimate.
Enter the value or values in a column. The guess or estimate will be entered at the bottom of the values in the same column.
Use the formula of =IRR to determine the IRR. The formula will be entered for the next cell. You will first select the relevant cells containing the values and then also select the cell where the estimate has been entered. The formula can thus look like this: =IRR(C3:C6,C7)
Note the colon or : stands for from this cell to that cell.
Press the enter key so that the Excel Internal Rate Return function can do the calculation.