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In order to find the Internal Rate of Return of an investment in Excel, we use the IRR function.
We can only use the IRR function if we have the cost of an investment, as well as an expected cash flow for a certain length of time.
We have an investment of 5000 Euros, and a 2500(twenty-five hundred) Euro return after year one, 2000 after year two, and 1500(fifteen hundred) after year 3
We’ll write Equals, IRR, and then we just have to select the values that we have set up, including our investment cost.
Closing the function, we will receive an IRR of 11%. We can now change the numbers in the plan to see how the IRR is affected.
Note that the initial investment must be the first value for this function to be able to work.
In this lesson we have gone through how to use the IRR function, which returns the Internal Rate of Return of an investment.