XIRR
 

Anyone have GOOD examples with explanation in text to demonstrate when/where
you'd use this function & why?
Thanks
Bob Umlas
Excel MVP but not a financial function whiz!

XIRR
 

Bob Umlas, Excel MVP
wrote...
Anyone have GOOD examples with explanation in text to demonstrate when/where
you'd use this function & why?
....

The description in online help isn't sufficient? Well, maybe it isn't.

In theory the IRR function could handle any cashflow no matter how
irregular if each cell (or each item if the 1st argument were an array)
represented a month, week, day, hour, minute, etc. and the cells
corresponding to periods without cashflows contained zeros. However,
such cashflow ranges (or arrays) could become quite large and contain
mostly zeros.

In reality the IRR function breaks down when its 1st argument contains
more than a few hundred cells. XIRR requires only the nonzero cashflows
plus their dates, so data entry could be much less than for and
equivalent cashflow for IRR. It may also break down if there are more
than a few hundred nonzero cashflows (never torture tested it), but
it's much more flexible than IRR. So in short XIRR handles a breader
set of cashflows than IRR.

As for examples and when you'd use IRR or XIRR, why do you want to
know? If it's purely personal interest, wouldn't you be better off
reading a text on finance? Even if it's for a presentation to others,
wouldn't learning the subject matter be a better way of understanding
IRR and XIRR?

XIRR
 

I'm actually teaching a class and the client wants an explanation with
examples of CAGR(a.k.a XIRR), and I don't really have the time to read a
financial book to help explain, hence I asked! Not at all for personal use.
And I don't know of a book which deals specifically with XIRR/IRR/NPV/PV...
etc functions in Excel.

"Harlan Grove" wrote:

Bob Umlas, Excel MVP
wrote...
Anyone have GOOD examples with explanation in text to demonstrate when/where
you'd use this function & why?
....

The description in online help isn't sufficient? Well, maybe it isn't.

In theory the IRR function could handle any cashflow no matter how
irregular if each cell (or each item if the 1st argument were an array)
represented a month, week, day, hour, minute, etc. and the cells
corresponding to periods without cashflows contained zeros. However,
such cashflow ranges (or arrays) could become quite large and contain
mostly zeros.

In reality the IRR function breaks down when its 1st argument contains
more than a few hundred cells. XIRR requires only the nonzero cashflows
plus their dates, so data entry could be much less than for and
equivalent cashflow for IRR. It may also break down if there are more
than a few hundred nonzero cashflows (never torture tested it), but
it's much more flexible than IRR. So in short XIRR handles a breader
set of cashflows than IRR.

As for examples and when you'd use IRR or XIRR, why do you want to
know? If it's purely personal interest, wouldn't you be better off
reading a text on finance? Even if it's for a presentation to others,
wouldn't learning the subject matter be a better way of understanding
IRR and XIRR?

XIRR
 

In my opinion, the most common use of XIRR is to calculate your rate of return
on investment.

Suppose you invested the following amounts on the specified dates:

01/15/05 $10,000
03/25/05 $1,000
11/22/05 $3,000
12/24/05 $2,000- [withdrawn]
06/15/06 $5,000

On December 31, 2006, your investment was worth $25,000. What's your rate of
return?

Add a row at the end for 12/31/06 and -25,000, and feed the ranges to XIRR, and
it will calculate the rate for you.

--
Regards,
Fred

PS. If you want to know *how* XIRR does it, just let me know.


"Bob Umlas, Excel MVP" wrote in
message ...
Anyone have GOOD examples with explanation in text to demonstrate when/where
you'd use this function & why?
Thanks
Bob Umlas
Excel MVP but not a financial function whiz!