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