Easiest way to calculate IRR

[OurRealtor]

A $20,000 investment was forecasted to produce a level annuity cash flow of $3,100 per year


(







EOY) for ten years. What is the IRR?



--

I don't want to do it via HP10BII, though I tried Newton's iteration, its never ending, not found?

Hope someone write easiest formula/trial-error approach to calculate IRR.
There is an alternative way:

irr = iL + [(iU-iL)(npvL)] / [npvL-npvU]

But it takes time, too.

 

[Thomas Beyer]

8.88% .. assuming 0 as the last payment, i.e. no repayment of principal

14.86% .. assuming you get the $20,000 back too after 10 years



use excel and the function @IRR

 

[OurRealtor]

[quote user=ThomasBeyer]8.88% .. assuming 0 as the last payment, i.e. no repayment of principal

14.86% .. assuming you get the $20,000 back too after 10 years



use excel and the function @IRR


Yes, check your answer for 2nd part it is 16.80091%

 

[Nir]

yes, 8.88% with no repayment of principal.

However, if you get 20K back it's 15.5%, not 14.86% nor 16.80091%.

Thomas, to get 14.86% you entered the following cells:

-20000






3100






3100






3100






3100






3100






3100






3100






3100






3100






3100






20000

Instead of:







12.75pt;border: #ece9d8;">-20000




3100






3100






3100






3100






3100






3100






3100






3100






3100






23100







Please note: the last payment is 23100=20K+3100. Excel's IRR formula gives weight to the order.

your only typo was plugging 20K after 11 yrs instead of 10.



Regards,

N.