Hi,

Can someone please give me the formula with which I could calculate irr-internal rate of return by:

1. interpolation
2. via excel spreadsheet.

Please include both methods, as a control measure I'd like to use both to get the same answer.

Regards

Assume the two figures are A and B.
The interpolation of them is .5( A + B)

_____________________________________

In Spreadsheet.
Assume the first figure is in A1 and the
second figure isin B1 .
If you enter this formula in C1
The formula is = .5(A1 + B1)
You should get the right answer.

The two figures will be the same.

hi,

the interpolation I meant was; trying to find irr manually ( with pen, paper and calculator )and using a certain formula involving the 2 rates and their npvs. I can't quite remember the formula but I'd appreciate it if you could reply with the formula and detailed explanation.

nb: the project has a life span of 4years,costs £40,000 and has the following inflows from years 1-4 respectively, £12,000, £16,000, £18,000, £14,000 and a scrap value of £4,000

regards

Quote:

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Originally Posted by bingates1

hi,

can some1 please give me the formula with which i could calculate irr-internal rate of return by:

1. interpolation
2. via excel spreadsheet.

please include both methods, as a control measure i'd like to use both to get the same answer.

regards

---

First I would not use the iteration or as you call it interpolation method. This is going to take you forever unless the IRR is a round number which is not likely. Using this method you will need to keep guessing at the discount rate needed until you find the one that makes NPV equal zero. If you still want to use this method take a look at this:

Internal rate of return - Wikipedia, the free encyclopedia

If you want to verify the IRR that your spreadsheet calculates I recommend you get a financial calculator (I like the TI-BAII Plus).

Formula in excel for this is:

IRR=(values,)

Where values is your stream of payments for example say you exchange $100,000 for these payments (year 1 10,000, year 2 20,000, year 3 123,000 year 4 500). You would enter this as -100,000, 10,000… across a row in the spreadsheet. Say these were in row 5 B-F. The formula would be =IRR(B5:F5) result 17.1%

Quote:

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Originally Posted by ROLCAM

Assume the two figures are A and B.
The interpolation of them is .5( A + B)

_____________________________________

In Spreadsheet.
Assume the first figure is in A1 and the
second figure isin B1 .
If you enter this formula in C1
The formula is = .5(A1 + B1)
You should get the right answer.

The two figures will be the same.

---

:confused:

If the question was how do you calaculate the average of two numbers you would be correct. :rolleyes:

However, the question was how to compute IRR and this answer is totally wrong.

Quote:

---

Originally Posted by bingates1

hi,

the interpolation i meant was; trying to find irr manually ( with pen, paper and calculator )and using a certain formula involving the 2 rates and their npvs. i can't quite remember the formula but i'd appreciate it if you could reply with the formula and detailed explanation.

nb: the project has a life span of 4years,costs £40,000 and has the following inflows from years 1-4 respectively, £12,000, £16,000, £18,000, £14,000 and a scrap value of £4,000

regards

---

Please see the Wiki link I posted above, if you still have questions let me know.