How to Calculate the Internal Rate of Return or IRR in Microsoft Excel

Before investing in a project or business, it is necessary to find out if said business can benefit you in the future. By knowing for sure this you will be able to know if the moment will come when you can recover the little money you invested or if you will be able to obtain profits even a little so as not to waste wasted time.

Knowing these things will help you better plan your projects and know how to manage your income in the best way, even if it is few. If you are thinking of starting your own business, in this article we will show you how to calculate the IRR at the internal rate and of return of the Excel program and which we can obtain under a subscription to Microsoft 365.

What is the IRR and what are some of its characteristics?

This is a digital document that can help you calculate the discount or the possibility of success that a project could have. It can help you calculate the amount of current value of the figures, even if it is completely net zero speaking in a certain geometric way you can and reviewing theto the amount of money that will go into your pocket or what your investment will produce in the future.

The figures, whether large or small, are identified as “opportunity price”, And that if a specific business is really good, even if you invest even a little money in the future, you will be able to earn much more than you invested. But to know if a business is good or not, you have to put in a table the amount to be invested and the amount of the profits, this is called “Rate of return”.

Now, when you have a considerable rate of return, you can invest in a certain project without any problems. However, now let us see cHow to do a IRR in Microsoft Excel.

Instructional guide to make a IRR in Microsoft Excel

We had already said that while the greater the The most reliable rate of return is the investment to be done. To make an IRR in Excel you must follow the following steps and thus know if a business is suitable for you or not.

Step 1: Go to the finance library

Open Excel and take a blank document or if you already have a document prepared then you can open that document. Now scroll down to the menu bar and select the “Formulas” section, there you will see some of the most used finance libraries such as logic, time and date and time libraries. However, the only thing that should interest you for the IRR is the financial tools option which is found next to the finance libraries.

Step 2: Find the IRR

To do this, look for the icon of a small green book that in the text says “Finance” this small icon is next to the function libraries “Recent “and” Date and time”. Now, when you find the small book, click on it and you will see that a large bar of options slides out. Scroll to the end of the options bar that will appear and then proceed to Select “IRR”. In addition to the “IRR” function, Excel contains other functions that you should be able to master as much as possible.

Step 3: Enter the function arguments

Once you press “IRR” you will see that you get a small box, in which you must place the values ​​and then the estimate. These are data that you must enter if you want to acquire a correct calculation. In this case, the values ​​are a reference to the cells in Excel that have figures that we want to calculate their internal rate of return.

And the estimate is the quantity or the number you expect to receive as the bottom line of the account. Now, immediately after you press “Accept” the amount will be calculated. Once you see the amount and see that it is something that should be kept secret then you can put a password to the Excel document. Something that will help you to know better about the profits of such a project you can calculate the percentages in a pie chart.