Question

How do I get the Internal Rate of Return (IRR)? Please complete this worksheet.

E G H 1 - 2 DISCOUNT RATE IRR 5 EXAMPLE 1 CASH FLOWS NOW I YEAR O CF -800 50 pv factor 2 100 3 300 4 305 5 320 6 7 8 pvcf NPV 10 11 12 13 EXAMPLE 2 DISCOUNT RATE CASH FLOWS IRR 14 NOW YEAR O -100000 1 10000 3 14,000 12,500 18,550 181250 15 16 17 18 CF pv factor pvcf NPV 19

Answer 1

	Example 1	Calculation of IRR
	Discount Rate	10.00%
	Column Reference	A	B	C	D	E	F
Row No.		Year 0	Year 1	Year 2	Year 3	Year 4	Year 5
1	Cashflows	-800	50	100	300	305	320
2	PV factor		0.91	0.83	0.75	0.68	0.62
3	PV of cashflows	-	45	83	225	208	199
4	NPV	761
5	IRR	8.45%
	Example 2	Calculation of IRR
	Discount Rate	8.00%
	Column Reference	A	B	C	D	E	F
Row No.		Year 0	Year 1	Year 2	Year 3	Year 4	Year 5
1	Cashflows	-1,00,000	10,000	12,500	14,000	18,550	1,81,250
2	PV factor		0.93	0.84	0.77	0.70	0.63
3	PV of cashflows	-	9,259	10,522	10,713	12,905	1,14,626
4	NPV	1,58,025
5	IRR	21.92%

Calculation of present value factor = 1/(1+Discount rate)^{No. of years}

IRR can be calculated in excel by using the formula =IRR(A1:F1,any value)