How to use the IRR function in Microsoft Excel?

I have the choice to either pay someone a lump sum of $100,000 or make 4 payments of $20,000, $30,000, $15,000, and $50,000. I want to find the the interest rate at which I would be able to make either choice because the net present value of each way is equal. How could I do this while still keeping the numbers of each all positive or negative in the spreadsheet (you can change them in the formula if its possible and works properly). I can't seem to figure this out.

1 Answer

  • Norman
    Lv 4
    1 decade ago
    Favorite Answer

    I'm not sure that I'm understanding you correctly but Excel's "Internal Rate of Return" (IRR) formula will only give proper results in the case of equal and regular payments. This does not appear to be your case.

    You have also not stated your repayment periods. However assuming you were to pay these amounts over a year then with your 4 payments you would be paying $15,000 dollars more than the lump sum. This would amount to 15% additional payment. Any interest rate below 15% would therefore be profitable for you if you were to opt for the lump sum.

    Hope this answers your query, otherwise clarify further

    • Commenter avatarLogin to reply the answers
Still have questions? Get your answers by asking now.