Before investing in a project or business, it is necessary to find out if said business can benefit you in the future. By knowing this for sure, 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 lost time .
How to Calculate the Internal Rate of Return or IRR in Microsoft Excel
Knowing these things will help you better plan your projects and know how to manage your income in the best way, even if they are 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 return of the Excel program and which we can obtain under a Microsoft 365 subscription .
Index( )
- What is the TIR and what are some of its characteristics?
- Instructional guide to make a TIR in Microsoft Excel
- Step 1: Go to the finance library
- Step 2: Find the IRR
- Step 3: Enter the function arguments
What is the TIR 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 will be able to check the amount of money that will enter your pocket or that your investment will produce in the future.
The figures, whether large or small, are identified as ” opportunity price “, and that if a particular business is really good, even if you invest even a little money in the future, you can earn much more than what 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 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 ‘s see how to do an IRR in Microsoft Excel .
Instructional guide to make a TIR in Microsoft Excel
We had already said before that the higher the Rate of Return, the more reliable the investment that will be made. To make an IRR in Excel you must follow the following steps and thus know if a business suits you or not.
Step 1: Go to the finance library
Open the Excel and take a blank document or if you already have an elaborate document then you can open that document. Now slide 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. However, the only one that should interest you for the IRR is the option of financial tools that 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 text says “Finances” this small icon is next to the “ Recent” and “Date and time ” function libraries. Now, when you find the little book, click on it and you will see that a large bar of options slides. Scroll to the bottom of the options bar that will appear and then proceed to Select “TIR”. In addition to the “IRR” function, Excel contains other functions that you should master as much as possible .
Step 3: Enter the function arguments
Once you press “IRR” you will see that a small box appears, 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 Excel cells that have figures that you want to calculate your internal rate of return.
And the estimate is the amount or the number that you expect to receive as the final result of the account. Now, immediately after you press “OK” the amount will be calculated. Once you see the amount and you see that it is something that should be kept secret, then you can put a password on the Excel document. Something that will help you to know better the profits of such a project you can calculate the percentages in a circular graph.