My theory on what's going wrong is you're just being careless with the data.

I agree that on the series {-3.25,1.77,1.69,20.40} the IRR is 115%

On the numbers you originally posted, one of them was ".1.64". I assumed
that this was .164 to match the previous cash flow. Using
{-3.25,0.177,0.164,20.40} gives an IRR of 87%.

However, you interpreted it as 1.64, as using {-3.25,0.177,1.64,20.40} gives
an IRR of 95%.

So you are using IRR correctly. Just make sure your data is correct.

Regards,
Fred.

"Will" wrote in message
...
I guess it would help if I got my numbers right. The numbers should have
been:

F29 ($3.25)
F30 $1.77
F31 $1.69
F32 $20.40

But IRR on that gives me 114.8% On the numbers I originally posted IRR
is
giving me 95%. I am using =IRR(F29:F32).

Your number looks about right to me, so I conclude I must be mis-using
IRR.
Any theories on what is going on there?

XIRR is giving a similar (incorrect) result.

--
Will


"Fred Smith" wrote in message
...
When I feed those four numbers to IRR, I get 87%. This means your money
slightly less than doubles every year. Doubling would turn 3.25 -
6.50 -
13.00 - 26.00. So 87% looks right to me.

What IRR formula did you use?

Regarding your request to use dates other than the first of the year, use
the XIRR function.

Regards,
Fred.

"Will" wrote in message
...
I'm having problems understanding how to calculate the annual growth
rate
of
an investment.

I have the present values at 5% discount rate for the initial
investment
and
all future-year cash flows. From that I am able to sum up the
present
values, compare that to the initial investment, and that gives me a
total
return. Unfortunately, that number isn't all that meaningful since it
is
not a normalized number. I want to normalize by expressing the return
as
an annual percentage growth rate.

I thought that taking the internal rate of return (IRR) of the present
values of the investment plus cash flows would give me that number.
But
it
doesn't appear to work. If I take the number IRR calculates and
multiply
the investment by (1+IRR)^number of years it does not equate the return
I
get when I take the sum of the present values and divide by initial
investment cost.

Let's use a real example. Here are the present values:

Initial Investment -$3.25 // I would like to be able to
specify
any arbitrary start date, not just 1/1/2009.
1/1/2010: +$.177
1/1/2011: +$.1.64
1/1/2012: +$20.40 // includes return of
principal
as
well as a dividend netted together

These sum to $20.61 and this is a 634% gain on the initial investment
(not
normalized for time).

When I take IRR for those four numbers above, the return is 115%.

How should I be calculating the annual interest rate appreciation for
the
present values given above?

--
Will