Requirement Summary
The task involves implementing the XIRR formula in Excel to calculate the internal rate of return for a series of cash flows occurring at irregular intervals.
Code Generated
=XIRR(values, dates, guess)
Code Explanation
The XIRR function in Excel is used to calculate the internal rate of return for a series of cash flows that occur at irregular intervals. Here’s a breakdown of the function’s parameters:
- values: This is an array or a reference to cells that represent the cash flows. These cash flows can be both positive (income) and negative (expenses) values.
- dates: This parameter is an array or a reference to cells that contain the dates corresponding to each cash flow. Dates must be in chronological order.
- guess: This is an optional parameter that represents your initial guess for the internal rate of return. If omitted, Excel uses 0.1 (10%) as the default value.
The XIRR function returns the internal rate of return for the cash flows, which is the interest rate at which the net present value of all cash flows (positive and negative) equals zero. This rate indicates the profitability of the investment or project.
By using the XIRR formula in Excel, you can efficiently analyze the returns on investments or projects with irregular cash flows, providing valuable insights for financial decision-making.
