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