Please Note: This article is written for users of the following Microsoft Excel versions: 2007, 2010, 2013, 2016, 2019, 2021, and Excel in Microsoft 365. If you are using an earlier version (Excel 2003 or earlier), this tip may not work for you. For a version of this tip written specifically for earlier versions of Excel, click here: Using the IRR Function.

Using the IRR Function

Written by Allen Wyatt (last updated June 11, 2022)
This tip applies to Excel 2007, 2010, 2013, 2016, 2019, 2021, and Excel in Microsoft 365


The IRR function is provided by Excel so you can calculate an internal rate of return for a series of values. The IRR is the interest rate accrued on an investment consisting of payments and income that occur at the same regular 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 daughter's business, and she will make payments back to you annually over the course of four years. You are planning to invest $50,000, and you expect to receive $10,000 in the first year, $17,500 in the second year, $25,000 in the third, and $30,000 in the fourth.

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, 10000 in cell D5, 17500 in cell D6, 25000 in cell D7, and 30000 in cell D8. To calculate the internal rate of return, you would use the following formula:

=IRR(D4:D8)

The function returns an IRR of 19.49%.

The ranges you use with the IRR 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:

=IRR(D4:D8, -5%)

This usage means that the IRR function starts calculating at �5%, and then recursively attempts to resolve the IRR based on the values in the range.

ExcelTips is your source for cost-effective Microsoft Excel training. This tip (12360) applies to Microsoft Excel 2007, 2010, 2013, 2016, 2019, 2021, and Excel in Microsoft 365. You can find a version of this tip for the older menu interface of Excel here: Using the IRR 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

Positioning Line Numbers

Line numbers can be added to a document, and is typically done in legal documents. The line numbers appear to the left of ...

Discover More

Extending a Paragraph into the Left Margin

Word allows you to format a paragraph so that it extends into the left margin of the document. This is done by setting a ...

Discover More

Printing Only Selected Pages

When you print a worksheet, you don't need to print the whole thing. You can print only the pages you want. Here's how to ...

Discover More

Solve Real Business Problems Master business modeling and analysis techniques with Excel and transform data into bottom-line results. This hands-on, scenario-focused guide shows you how to use the latest Excel tools to integrate data from multiple tables. Check out Microsoft Excel 2013 Data Analysis and Business Modeling today!

More ExcelTips (ribbon)

Performing Integer Divisions

If you need to do a lot of work with whole numbers (integers), then you may wonder which of three functions you should ...

Discover More

Leaving a Cell Value Unchanged If a Condition Is False

Ever want the IF function to only return a value if the condition it is testing is true, and not if the condition is ...

Discover More

Using SUMIF with Text Parameters

The SUMIF function is supposed to work just fine doing comparisons with text values. This isn't a hard-and-fast rule, ...

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}] (all 7 characters, in the sequence shown) in your comment text. You’ll be prompted to upload your image when you submit the comment. Maximum image size is 6Mpixels. 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 two minus 1?

There are currently no comments for this tip. (Be the first to leave your comment—just use the simple form above!)


This Site

Got a version of Excel that uses the ribbon interface (Excel 2007 or later)? This site is for you! If you use an earlier version of Excel, visit our ExcelTips site focusing on the menu 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.