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How to calculate IRR NPV for 10 half yearly cash flows

L

Liyakatali Lal

New Member
Hi Everyone,


I am new to this forum & even to chandoo.com. It's a great place with lot of excel champs out there.


Btw, my question is how to calculate project IRR & NPV based on 10 half yearly cash flow.
 
Liyakatali Lal,


You can combine the 10 Half Year reurns to make 5 Yearly returns


NPV =NPV(Rate, Return 1, Return 2...)

eg: =NPV(10,D10:D15)

Where Return is Annual discount rate. This might represent the rate of inflation or the interest rate of a competing investment.


IRR =IRR(Return 1, Return 2...)

eg: =IRR(D10:D15)
 
Hi Liyakatali,


The NPV is based on a periodic cash flow and you must match the rate to the cash flow.


So if the rate is 10% pa, you must use a rate of 5%, that is a rate that is converted twice a year. If it is 10% pa and the cash flow is quarterly you must use 2.5% or converted quarterly.


The IRR formula is an internal formula so the result would be an "annual" rate. If you wish to find the IRR for a cash flow other that annual, I would suggest that you calculate the NPV and do a Goal-Seek to return a zero value for the NPV.


Hope this is clear


kanti
 
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