How do I calculate IRR(Internal Rate of Return) of unequal cash flows.

Question

I have got 4 cash flows:6500;3000;3000;1000. How do I calculate interest rate at which all of them in present are equal to 10 000. 6500/i+3000/i^2+3000/i^3+1000/i^4=1000. Excel computes it by interest rate guess but how do I do it myself?

Are the cash flows at yearly intervals? You should be dividing by $(1+i)^n$. You also have a typo as the final value is listed at $1000$ not $10000$ — Ross Millikan, Nov 06 '17 at 19:13

score 0 · Accepted Answer · answered Nov 06 '17 at 19:14

0

You can't solve this algebraically, just numerically. You can use any root finding algorithm, bisection, Newton, secant, etc.

answered Nov 06 '17 at 19:14

Ross Millikan

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How do I calculate IRR(Internal Rate of Return) of unequal cash flows.

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