IRR computation with Excel IRR Function & Verification with NPV calculation

Year Date Cash Flows Present Value of

cashflows discounted @
10.00%
Year 0 1-Jan-09 -22,972 -22,972.00
Year 1 1-Jan-10 -22,972 -20,883.64
Year 2 1-Jan-11 -22,972 -18,985.12
Year 3 1-Jan-12 -22,972 -17,259.20
Year 4 1-Jan-13 -22,972 -15,690.19
Year 5 1-Jan-14 -22,972
Year 6 1-Jan-15 -22,972
Year 7 1-Jan-16 -22,972
Year 8 1-Jan-17 -22,972
Year 9 1-Jan-18 -22,972
Year 10 1-Jan-19 -22,972
Year 11 1-Jan-20 -22,972
Year 12 1-Jan-21 -22,972
Year 13 1-Jan-22 -22,972
Year 14 1-Jan-23 -22,972
Year 15 1-Jan-24 -22,972
Year 16 1-Jan-25 -22,972
Year 17 1-Jan-26 -22,972
Year 18 1-Jan-27 -22,972
Year 19 1-Jan-28 -22,972
Year 20 1-Jan-29 -22,972
Year 21 1-Jan-30 -22,972
Year 22 1-Jan-31 -22,972
Year 23 1-Jan-32 -22,972
Year 24 1-Jan-33 -22,972
Year 25 1-Jan-34 -22,972
Year 26 1-Jan-35 1,425,000 884,812.89
Total negative cash flows or outflows 22,972 22,972.00
Total positive cash flows or inflows 850,700 811,994.74
Sum of positive and negative discounted cash flows 789,022.74
Internal Rate of Return (IRR) 5.93% This is equivalent to the discount rate which makes the NPV of cash flows

IRR Calculation with unequal cash flows: (Smaller cash inflows in initial years and larger cash inflows in later yea
Year Date Cash Flows Present Value of
cashflows discounted @
9.13%
Year 0 1-Jan-09 -100 -100.00
Year 1 1-Jan-10 0 0.00
Year 2 1-Jan-11 5 4.20
Year 3 1-Jan-12 10 7.69
Year 4 1-Jan-13 15 10.58
Year 5 1-Jan-14 120 77.53
Total negative cash flows or outflows 100 100.00
Total positive cash flows or inflows 150 100.00
Sum of positive and negative discounted cash flows 0.00
Internal Rate of Return (IRR) 9.13% IRR lower than in case A (above) because of smaller cash inflows initial y
values of aggregate cash flows is same in both A & B cases
IRR Calculation with unequal cash flows: (Larger cash inflows in initial years and smaller cash inflows in later yea
Year Date Cash Flows Present Value of
cashflows discounted @
 20.27%
Year 0 1-Jan-09 -100 -100.00
Year 1 1-Jan-10 50 41.57
Year 2 1-Jan-11 40 27.65
Year 3 1-Jan-12 30 17.24
Year 4 1-Jan-13 20 9.56
Year 5 1-Jan-14 10 3.97
Total negative cash flows or outflows 100 100.00
Total positive cash flows or inflows 150 100.00
Sum of positive and negative discounted cash flows 0.00
Internal Rate of Return (IRR) 20.27% IRR higher than in case A (above) because of larger cash inflows initial ye
values of aggregate cash flows is same in all the above cases
 A

Discounted from Year1 to Year0

Discounted from Year2 to Year0
Discounted from Year3 to Year0
Discounted from Year4 to Year0

Discounted from Year5 to Year0

<=Net Present Value (NPV)

nt to the discount rate which makes the NPV of cash flows Zero as above

initial years and larger cash inflows in later years)

B

Discounted from Year1 to Year0

Discounted from Year2 to Year0
Discounted from Year3 to Year0
Discounted from Year4 to Year0
Discounted from Year5 to Year0

<=Net Present Value (NPV)

n case A (above) because of smaller cash inflows initial years vis-à-vis later years, though absolute
gate cash flows is same in both A & B cases
nitial years and smaller cash inflows in later years)
C
 Discounted from Year1 to Year0
Discounted from Year2 to Year0
Discounted from Year3 to Year0
Discounted from Year4 to Year0
Discounted from Year5 to Year0

<=Net Present Value (NPV)

in case A (above) because of larger cash inflows initial years vis-à-vis later years, though absolute
gate cash flows is same in all the above cases