IRR Google Sheet Formula

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IRR Formula Syntax

=IRR({-10000, 2500, 3000, 3500, 4000, 4500})

Example Use Case

Calculating the internal rate of return for a series of cash flows

Understanding the IRR Formula

The IRR function in Excel calculates the internal rate of return for a series of cash flows, which is the discount rate that makes the net present value equal to zero. It's an investment analysis tool for profitability assessment—like evaluating the potential return of a project or investment.

IRR({-10000, 2500, 3000, 3500, 4000, 4500}) returns the IRR for an initial $10,000 investment followed by five annual returns. It takes values and optional guess arguments, computing the annualized rate of return that equates the present value of the cash flows to zero—essential for comparing investment opportunities.

Why Use IRR?

IRR evaluates investment efficiency—think capital budgeting or project selection. Its return-based measure incorporates the time value of money, making it ideal for comparing investment opportunities of different sizes or durations on a level playing field.

Example with Sample Data

Cash Flow Series	Formula	Result
-$10,000 $2,500 $3,000 $3,500 $4,000 $4,500	=IRR({-10000, 2500, 3000, 3500, 4000, 4500})	15.24%
-$5,000 $1,500 $2,500 $3,500	=IRR({-5000, 1500, 2500, 3500})	23.37%
-$100,000 $35,000 $35,000 $35,000 $35,000	=IRR({-100000, 35000, 35000, 35000, 35000})	15.91%

IRR determines investment returns: 15.24% for the first scenario, 23.37% for the second. Higher IRR generally indicates better investment efficiency. It's a profitability analyzer.