Calculating Internal Rate Of Return

When calculating internal rate of return you can use the provided calculator on your series of cash flows. The IRR formula is built into the calculator.

The Calculator

You will see two series of cash flows. Each series of cash flows support the IRR result at the bottom. To obtain a IRR for your cash flows, you need to supply the actual cash flows from your project. Be sure to clear out the numbers to zero for the years not needed. The year column can be changed by just changing the first year.

What It Means

Use the internal rate of return as a comparison number between projects. The higher the better!

Summary

Once you have finished calculating internal rate of return for each of your projects, you can make a rational decision about which project is most economical for your situation. Warning! The IRR found may not be valid if the cash flows swing back and forth from positive to negative values. It is possible to have more than one IRR answer in that case.

Calculating Internal Rate Of Return to Business Analysis Made Easy

© 2006 Stellar Force

NPV and IRR for Dummies The calculator provided here can give you a taste of how NPV or IRR works. However, if you want more to make serious business decisions, you may want something more. If you have a spreadsheet program on your computer, then the ideal way to perfom a NPV or IRR analysis is by using your spreadsheet program. You simple set up the cells for the cash flows and plug in the formulas. If that is not an option for you, consider using a template. Templates will cost some money but they will make it easy. Just plug in the numbers and push a button to get your results. If you really want to be spoon fed the price goes up. Consultant services are available to do the analysis for you. The analysis is performed and the results are interpreted for you. The cost of this service is $250.00 per analysis.