How to Use the XIRR Function in Excel
Overview of XIRR Function in Excel and Google Sheets
The XIRR function in Excel and Google Sheets is designed to compute the internal rate of return (IRR) for a sequence of cash flows that do not occur at regular intervals. This functionality proves invaluable for analyzing investments or projects characterized by irregular cash inflows and outflows.
Basic Syntax
The syntax for the XIRR function is as follows:
XIRR(values, dates, [guess])- values: A range or array of numbers representing the cash flows. These include both incoming (positive values) and outgoing (negative values) amounts.
- dates: A range or array of dates corresponding to each cash flow in the ‘values’ argument. These dates must be formatted as actual date values.
- guess: (Optional) An initial guess at the internal rate of return. If omitted, Excel and Google Sheets default this value to 0.1 (or 10%).
Example Usage
Consider an example where an investment involves irregular cash flows. Below is a table depicting these cash flows and their respective dates:
| Date | Cash Flow |
|---|---|
| 01/01/2021 | -10000 |
| 05/30/2021 | 2500 |
| 09/15/2021 | 4000 |
| 12/20/2021 | 3000 |
To determine the internal rate of return for this investment using the XIRR function in Excel or Google Sheets, input the following formula:
=XIRR(B2:B5, A2:A5)In this formula, B2:B5 refers to the cash flow values and A2:A5 to their corresponding dates. The function calculates the internal rate of return based on these cash flows.
Applications of XIRR Function
The XIRR function has various applications in the financial sector, including but not limited to:
- Assessing the returns on investment portfolios that involve irregular deposits and withdrawals.
- Computing the internal rate of return for projects with non-periodic cash flows.
- Estimating the required rate of return to achieve a specific financial goal given a series of cash flows.
The XIRR function allows for precise financial evaluation and decision-making by accurately calculating the rate of return for investments or projects with irregular or non-periodic cash flows.
More information: https://support.microsoft.com/en-us/office/xirr-function-de1242ec-6477-445b-b11b-a303ad9adc9d
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Returns the number of days in the coupon period that contains the settlement date
Returns the number of days from the settlement date to the next coupon date
Returns the next coupon date after the settlement date
Returns the number of coupons payable between the settlement date and maturity date
Returns the previous coupon date before the settlement date
Returns the cumulative interest paid between two periods
Returns the cumulative principal paid on a loan between two periods
Returns the depreciation of an asset for a specified period by using the fixed-declining balance method
Returns the depreciation of an asset for a specified period by using the double-declining balance method or some other method that you specify
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Converts a dollar price, expressed as a decimal number, into a dollar price, expressed as a fraction
Returns the annual duration of a security with periodic interest payments
Returns the effective annual interest rate
Returns the future value of an investment
Returns the future value of an initial principal after applying a series of compound interest rates
Returns the interest rate for a fully invested security
Returns the interest payment for an investment for a given period
Returns the internal rate of return for a series of cash flows
Calculates the interest paid during a specific period of an investment
Returns the Macauley modified duration for a security with an assumed par value of $100
Returns the internal rate of return where positive and negative cash flows are financed at different rates
Returns the annual nominal interest rate
Returns the number of periods for an investment
Returns the net present value of an investment based on a series of periodic cash flows and a discount rate
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Returns the yield of a security with an odd first period
Returns the price per $100 face value of a security with an odd last period
Returns the yield of a security with an odd last period
Returns the number of periods required by an investment to reach a specified value
Returns the periodic payment for an annuity
Returns the payment on the principal for an investment for a given period
Returns the price per $100 face value of a security that pays periodic interest
Returns the price per $100 face value of a discounted security
Returns the price per $100 face value of a security that pays interest at maturity
Returns the present value of an investment
Returns the interest rate per period of an annuity
Returns the amount received at maturity for a fully invested security
Returns an equivalent interest rate for the growth of an investment
Returns the straight-line depreciation of an asset for one period
Returns the sum-of-years' digits depreciation of an asset for a specified period
Returns the bond-equivalent yield for a Treasury bill
Returns the price per $100 face value for a Treasury bill
Returns the yield for a Treasury bill
Returns the depreciation of an asset for a specified or partial period by using a declining balance method
Returns the net present value for a schedule of cash flows that is not necessarily periodic
Returns the yield on a security that pays periodic interest
Returns the annual yield for a discounted security; for example, a Treasury bill
Returns the annual yield of a security that pays interest at maturity