IRR

P

PC

On a $2k investment you're making millions.

The IRR of 7688% is probably correct (I didn't check) and for the NPV you
would input 76.88. (Which is 7688%)

Nothing is wrong other than what are probably some very unrealistic
assumptions.

PC
 
R

Raymond Gallegos

I am getting conflicting (and confusing) results using the IRR and NPV
functions
in Excel. Here is the cashflow data for each year:

Year 1: (2,057)
Year 2: 155,849
Year 3: 333,756
Year 4: 459,403
Year 5: 592,126
Year 6: 725,751
Year 7: 860,094
Year 8: 976,671
Year 9: 1,036,326
Year 10: 5,247,233

When I compute the IRR I come up with 7688%. However, knowing that the
IRR should be the interest rate which makes the NPV = 0, when I use the NPV
calculation I should be using 76.88%, not 7688%. Therefore, I am assuming
I must divide the IRR result by 100 to get an appropriate IRR. Is this
correct?
Thanks for anyone's assistance.
 
R

Richard Buttrey

I am getting conflicting (and confusing) results using the IRR and NPV
functions
in Excel. Here is the cashflow data for each year:

Year 1: (2,057)
Year 2: 155,849
Year 3: 333,756
Year 4: 459,403
Year 5: 592,126
Year 6: 725,751
Year 7: 860,094
Year 8: 976,671
Year 9: 1,036,326
Year 10: 5,247,233

When I compute the IRR I come up with 7688%. However, knowing that the
IRR should be the interest rate which makes the NPV = 0, when I use the NPV
calculation I should be using 76.88%, not 7688%. Therefore, I am assuming
I must divide the IRR result by 100 to get an appropriate IRR. Is this
correct?
Thanks for anyone's assistance.
Click to expand...

I think you may be confusing the display of the %

The IRR formula returns a number 76.89. This is formatted as a % and
hence shows as 7689%. (You'd probably normally expect %s to be much
lower than this so maybe the size of the number is causing confusion.
e.g. a % of 10% is entered in these formulae as 0.1)

If you plug the number 76.89 into the NPV formula you'll find that it
returns zero

HTH


__
Richard Buttrey
Grappenhall, Cheshire, UK
__________________________
 
F

Fred Smith

Your data says you invested $2057, and the return was $10,387,209. That's a
pretty impressive return on investment. 7688% is correct, given the data.
 
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