Excel IRR and XIRR: Bug analyser

Published: October 11, 2013 at 7:00 am

Last Updated on

Excel’s IRR and XIRR and simple but excellent tools to estimate the returns from a periodic investment in a volatile instruments (eg. Mutual fund SIP).

Unfortunately, two issues affect its usage:

  •  Bug(s) of unknown origin that make it give the wrong result sometimes.

Read more about this here: XIRR: A Bug? (Thanks to financial planner Hari, for sending me this link)

  • When the cash flow (receipts – payments) becomes small or negative, there are two possibilities
    1. XIRR or IRR gives only one of the many possible solutions

Read more about this here: IRR/XIRR – Excel – Limitations of Calculating Complex Cash Flow Returns

    1. XIRR or IRR simply gives an error
  • A Youtube video sent by Hari, discusses these issues well: A look at Excel’s XIRR function You can read my discussion with the author of the video, if interested.
  • For a slightly more technical account: Sins of IRR

 Q: Can we check the results of IRR and XIRR, spot bug, understand errors and obtain all possible solutions (if they exist) for a given cash flow?

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A: Yes you can! With this tool

The Excel IRR and XIRR cash flow returns analyzer

You should use this tool to validate your results if 

  • XIRR gives you an abnormally small or large value, if IRR gives you an abnormally large value
  • The net cash flow (receipts – payments) is less than 1000

How it works

  • Using the mathematical expressions behind Excel functions NPV and XNPV, the analyzer gives you a range between which a possible solution to IRR or XIRR exists. For example if the answer is 10%, the limits of the range will be say, 5% to 15%.
  • This way all possible solutions ranges are determined.
  • Then for a given range, the solution is calculated using Excel’s GoalSeek
  • Using the GoalSeek result as a guess, the XIRR and IRR are calculated.

The analyzer allows you to check if results given by XIRR and IRR are unique and gives you the range between which all return solutions for a given cash flow exist.

Download the Excel IRR and XIRR Solution Analyzer

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Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored two print-books, You can be rich too with goal-based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management. He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice.
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4 Comments

  1. really i do not understand the subject matter due to my limitation , but for my work, i put the last entry as the a/m balance as received or paid as on date in your earlier version of such calculator , and i got the correct figure, i i think. for all practical purpose , i think, that would be enough. i am afraid i may have commented irrelevant without understanding. apologized..

  2. really i do not understand the subject matter due to my limitation , but for my work, i put the last entry as the a/m balance as received or paid as on date in your earlier version of such calculator , and i got the correct figure, i i think. for all practical purpose , i think, that would be enough. i am afraid i may have commented irrelevant without understanding. apologized..

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