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How do I calculate the IRR

What is the correct formula for calculating IRR?


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IRR measures the profitability of an investment by making the net present value of all cash flows from the investments equal to zero. IRR is in fact the interest rate at which the net present value of costs equal the net present value of the gains.

Its formula is the following

NPV = C(0) + C(1)/(1+r) + C(2)/(1+r)2 + … + C(n)/(1+r)n = 0

where C(n) is the cash flow for each period.
The formula needs to be solved for “r”.
Bulit-in IRR functions run iterations for “r”.
May 9th, 2011 at 12:12 PM
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