When you have an investment plan in mind it is always advisable to seek the advice of a finance specialist and to calculate the internal rate of return of your investment before proceeding. To calculate the internal rate of return you can search for an IRR calculator online or simply calculate your IRR in Excel.

To calculate the internal rate of return of your investment in Excel you need to take the following simple steps: open the Microsoft Excel program, click on the "Insert" option in the top horizontal bar, and select the "Function" option. If you have never used the IRR function it will not be present on the "Most recently used" list and you will need to look for it in the complete list of available functions.

Once the IRR function is accessed you need to enter some data like the cash flow that is involved in your investment plan (including the cost) which you must enter under "values" and an estimate of what you think the internal rate of return will be under "guess". You must have at least one negative value (payment) and one positive value (income). If the "guess" section is not filled Microsoft Excel will calculate the internal rate of return using the value of ten percent.

Two very important factors must be considered when entering the data into Excel: one is that you are working with both positive values (income) and negative values (payments) and they must be listed in the exact order as required and the second is that although the sums entered need not be even they must occur at regular periods like every year or every month. Calculating the IRR in Excel is much easier and takes a lot less time than calculating it manually.

The program will ignore any empty cells, text or logical values if they are entered.

The results when calculating the IRR in Excel are characterized by extreme accuracy, actually within 0.00001 percent, and the program will go through twenty tries before rendering the value error because it can not find a result that is correct. Although it may seem hard to believe sometimes it is possible to obtain several different results that are all correct when calculating the internal rate of return of your investment plan. This happens because the program notices any change in cash flow (from positive to negative or the other way around) and provides you with an additional result for each change. The net present value function (NPV) and the internal rate of return function (IRR) are closely related and the result of the internal rate of return calculation is the interest rate that corresponds to a net present value (NPV) of zero.

When you need to save time and energy calculating the internal rate of return you can use the Microsoft Excel program that is available on your computer. As you can see, it is not as difficult as using the complicated IRR formula, and you can use it on your computer at all times with very little effort or mathematical ability.