Financial Function | How to use Excel XIRR Function?

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In the previous post we saw ‘Financial Function | How to use Excel XNPV Function?’, now we will learn about the XIRR excel function.



How to Find Financial Function in excel?

To find financial function in excel open excel and click on the “Blank” to open a blank excel worksheet now click on the ‘Formula Tab’ and under ‘Function Library’ click on the ‘Financial’ option as shown below:



What is XIRR Function?

XIRR function calculate IRR based on the dates of cash flows. It Returns the internal rate of return for a schedule of cash flows that is not necessarily periodic (occur at irregular intervals). To calculate the internal rate of return for a series of periodic cash flows, use the IRR function.

XIRR excel function can enable us to carry out more meaningful project analysis when the cash flows are not periodic.


Syntax

XIRR(values, dates, [guess])


Arguments

The arguments of XIRR are values, dates and guess. Values are the cashflows and dates are the dates corresponding to the cashflows. Guess is an optional argument which is an estimated IRR. If it is not specified by the user, excel assumes it to be 10%.

Values    Required. A series of cash flows that corresponds to a schedule of payments in dates.

Dates    Required. A schedule of payment dates that corresponds to the cash flow payments.

Guess    Optional. A number that you guess is close to the result of XIRR.


Understand With Example

In the above example, the initial cash outflow is Rs. 1,90,000. Subsequent cashflows, as expected in the future, are laid down further.

Type’=’ insert XIRR function. Specify values as the range C4 to C9 and dates as the range B4 to B9. You may specify the guess rate at, say, 11%. Then close the function and hit enter. The IRR will be computed by excel.

The structures of the formula are shown in C11and the final result is the value shown on cell C13.


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