I have a question regarding IRR.
I am trying to figure out the IRR for an investment (actually, this has come
up a number of times in the past). Unfortunately, it is not one of those
simple cases where the initial investment is negative and all subsequent cash
flows are positive. There are a couple of times when the cash flow signs
switch. I understand the multiple IRR issue, but it still doesn't help that I
cannot get a return number from Excel.
I have to imagine that these cases, where the negatives and positives switch
more than once, is common. It is difficult to just say "well, there is no
IRR". I still need to know what the rate of return would be. What can I do?
Please help.
Thanks.
I think I misunderstood your problem.
If your problem is to generate an annualized return figure for data which does
not have an IRR that Excel can compute, I suppose you'd have to generate some
kind of approximation.
For your series of cash flows, it appears as if you are "investing" a total of
$8143 and getting back a total of $17,256 (negative vs positive flows). So
your gross return is $9,113 over five time-periods.
It is interesting that if you ignore the first $5000 payment you receive, the
IRR on the remaining cash flow calculates to 44%
--ron
