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Note: The Illustrations below focus on Excel based calculatio
IRR measures the return generated form a single or multip
Syntax =IRR(values,[guess])
Initial
investment-500
Year 1 350 0.672 235.24
Year 2 450 0.452 203.29
Year 3 150 0.304 45.54
Year 4 -90 0.204 -18.37
Year 5 250 0.137 34.29IRR 48.78% PV >> 500.00
Pitfalls/Remarks
1. Make sure to include initial investment as well (In negat
2. The guess part of the syntax is optional
3. Interval between periods must be equal
4. Has an accuracy of 0.00001%
Answer in Blue cells only!
Initial Investment -150
Year 1 -100
Year 2 -80
Year 3 0
Year 4 150
Year 5 300
Whe
PV must be
Illustration
Calculate IRR using Excel's bu
IRR
Popular Financial Functions
IRR, MIRR & NPV Calculation
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IRR
MIRR aims to de-link the Reinvestment Rate (RR) from IR
Syntax: =MIRR(values,finance_rate,reinvest_ra
Note: When RR = IRR, MIRR will equal IRR
Illustration
Initial
investment-500
Initial
investment-500
Year 1 350 Year 1 350
Year 2 450 Year 2 450
Year 3 150 Year 3 150
Year 4 -90 Year 4 -90
Year 5 250 Year 5 250
RR 10.00% RR 48.78%
IRR 48.78% IRR 48.78%
MIRR 24.38% MIRR 48.78%
Pitfalls/Remarks
1. Make sure to include initial investment as well (In negat
2. Interval between periods must be equal4. Has an accuracy of 0.00001%
Answer in Blue cells only!
Initial Investment -150
Year 1 -100
Year 2 -80
Year 3 0Year 4 150
Year 5 300
RR 11.5%
IRR 8%
MIRR
Calculate MIRR using Excel's b
MIRR
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NPV uses "Present Value" to determine the Time Value of
Syntax: =NPV(rate,value1,value2,...)Note: NPV = PV-Initial Investment
Illustration
Initial
investment500
Year 1 350 0.909 318.18
Year 2 450 0.826 371.90
Year 3 150 0.751 112.70
Year 4 -90 0.683 -61.47
Year 5 250 0.621 155.23
Cost of Capital 10.00% 10.00%
PV $896.54 PV >> 896.54
NPV $396.54 NPV>> 396.54
Pitfalls/Remarks
2. Interval between periods must be equal
Answer in Blue cells only!
Initial
investment500
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n alone. For conceptual understanding refer to this article
le stream of Cash inflows and outflows
= Cash Flow x Discount Factor
=sum(All discounted cash flows)
ive)
Check
n discounted at IRR,
same as Initial Investment
lt-in Function
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to arrive at a more realistic figure
e)
ive)
ilt-in Function
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Money
= Cash Flow x Discount Factor
=sum(All discounted cash flows)
=PV-Initial Investement
Initial investment 500
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Syntax =PMT(rate,nper,pv,[fv],[type])
Loan Amount $1,000.00
Period (in Years) 5
Months in a Year 12
Total Months 60
Interest Rate (annual) 7%Interest Rate (monthly) 0.58%
EMI $19.80
=PMT(0.58%,60,-1000)
Pitfalls/Remarks
1. Make sure to convert Interest Rates & No. of Periods to a monthl
2. Loan Amount must always be negative
Answer in Blue cells only!
Loan Amount $1,000.00
Period (in Years) 3
Interest Rate (annual) 8.5%
Months in a Year
Total Months
Interest Rate (monthly)
Equated Monthly Installment (EMI) are equal payments made throu
and pricinipal payments on a compounded basis.
PVAF Formula
PVAF Calculation
EMI (Amt/PVAF)
Illustration of PMTThe Present Value Annui
EM
Calculate EMI using Excel's built-i
Calculating EMIs using the PMT function
Popular Financial Functions
Calculating EMIs & Implied Rates
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EMI
Syntax: =RATE(nper,pmt,pv,[fv],[type],[guess])
Note: Rate thus calculated will be monthly. M
Loan Amount $1,000.00
Period (in Years) 5
Months in a Year 12
Total Months 60
EMI $19.80Implied Annual Rate 7.00% =RATE(60,$19.8,-1000)*12
Pitfalls/Remarks
1. Make sure to convert No. of Periods to a monthly basis
2. Loan Amount must always be negative
Answer in Blue cells only!
Loan Amount $1,000.00
Period (in Years) 3
EMI 31.57
Months in a Year 12
Total Months 36
Rate (Annual Basis)
Illustration
Using RATE function to find out Implied/Hidden Int
Calculate EMI using Excel's built-i
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=(1/i)-(1/((i*(1+i)^n)
50.50
$19.80
y basis
ghout the mentioned loan period. The payments incorporate both Interest
Checkty Factor (PVAF) can be used to test the
Is thus calculated
Function
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ultiply by 12 to get annual rate
erest Rate in an EMI
Function
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Syntax =PMT(rate,nper,pv,[fv],[type])
Annual Investment 5000
Period (in Years) 5
Interest Rate (annual) 15%
FV 33,712=FV(15%,5,-5000)
Pitfalls/Remarks
1. Make sure to convert Interest Rates & No. of Periods to a monthly b
2. Investment must always be negative
3. Investment must be regular
Answer in Blue cells only!
Monthly Investment 1000
Period (in Years) 3
Interest Rate (annual) 8.5%
Months in a Year
Total Months
Interest Rate (monthly)
Calculate Returns from a Annuity using Excel'
Illustration of FV
The Future Value Annuit
Ret
FVAF Formula
FVAF Calculation
Calculating Returns from a Annuity (Regular Investm
In the example below an investor wants to determine the Future Value
FV (Amt*FVAF)
Popular Financial Functions
Calculating Investment Returns
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Amount at the end of
investment horizon
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Invested ForMonthly
Investment 15%
4 5,000 8,745 =5000*(1+15%)^4
=((1+i)^n-1)/i 3 5,000 7,604 =5000*(1+15%)^3
6.74 2 5,000 6,613 =5000*(1+15%)^2
33,712 1 5,000 5,750 =5000*(1+15%)^10 5,000 5,000 =5000*(1+15%)^0
FV 33,712 =SUM(8745:5000)
sis
built-in Function
Auto Check
Factor (FVAF) can be used to Calculate
rn from an annuity
nts of Equal Amount)
from a Fixed investment of Rs.5000 every month for 5 Years
Manual Check
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