Excel allows a user to get an internal rate of return of an investment using the **IRR** function. This step by step tutorial will assist all levels of Excel users to learn how to use the IRR function in Excel.

*Figure 1. The result of the IRR function*

**Syntax of the IRR Formula**

The generic formula for the IRR function is:

**=IRR (values, [guess])**

The parameter of the IRR function is:

**values**– a range of cells containing values, including initial investment and incomes. The investment must have negative sign, as it is a cost**[guess]**– an estimated value for the expected IRR. This parameter is non-mandatory. If it’s omitted, the function will take a default value of 0.1 (=10%).

**Setting up Our Data for the IRR Function**

Let’s look at the structure of the data we will use. In column B (“Amount”), we have values including initial investment and yearly incomes. In column C (“Description”) we have description of every amount. In the cell E3, we want to get the IRR.

* Figure 2. Data that we will use in the IRR example*

**Get an IRR of Values Using the IRR Function**

In our example, we want to get the IRR of the values in the range B3:B10. The result will be in the cell E3.

The formula looks like:

**=IRR(B3:B10)**

The parameter **values **is the range B3:B10.

To apply the IRR function, we need to follow these steps:

- Select cell E3 and click on it
- Insert the formula:
`=IRR(B3:B10)`

- Press enter.

*Figure 3. Using the IRR function to get the internal rate of the investment*

Finally, the result in the cell E3 is 2%, which is the internal rate of the investment.

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