|Date||Cash flows (Rs.)|
In the above table, the cash flows are occurring at irregular intervals. Here, you can use XIRR function to compute the IRR for these cash flows. In an Excel sheet, first enter the original amount invested. The amount invested should be represented by a minus sign. In each cell enter the cash flows which received each period. Remember to include the minus sign whenever you invest money. Now find out XIRR by mentioning =XIRR(values,dates,guess)
Values refer to a series of cash flows that corresponds to a schedule of payments in dates. The first payment refers to the investment made at the beginning of the investment period and must be a negative value. All succeeding payments are discounted based on a 365-day year. The series of values must contain at least one positive and one negative value.
Dates stand for the date when the first investment was made and when the cash flows were received. Each date should correspond to its respective investment made or cash flow received as shown in the above table. Dates should be entered in DD-MM-YY (date-month-year) format. Problems can occur if dates are not entered in the right format. If any number in dates is not a valid date, XIRR returns the #VALUE! error value.
One of the disadvantages of the IRR function is that it assumes a periodic cash flow and most financial instruments these days are generally giving irregular cash flows. This is where the XIRR comes into play. XIRR allows for uneven cash flow intervals by taking into account the dates of which a cash flow occurs.
India Infoline News Service / 08:59, Sep 15, 2014
Many a times parents overlook other goals as they are too busy focusing on just one goal, that is on their child's education. They are too emotionally involved in achieving this particular goal that they forget planning for their retirement and saving for other emergencies.