I am working on calculating IRR for a project we are considering.
Here is the projected cash flow:
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A simple XIRR calculation returned a 226.7% IRR.
This seems way too high for me, so I used IRR on the same cash flows(without dates) to return a IRR of 10.348%. From reading this forum I understand this is the rate of return for a period, which in this case is months, so I used (1+.10348)^12-1 to return an annual IRR of 225.97%, which is close to my XIRR calc.
If someone could help me out and confirm my logic & calculations are correct?
I am also concerned I did not annualize the IRR correctly. Since my project timeline is 53 months and the IRR returned a value of 10.348% monthly return, do I need my calculation to be (1+.10348)^53-1? When I do this it returns a ridiculous 18,000%, but logically if the return is 10.348% a month, wouldn't I need to include all the months of the project to get the actual IRR?
Thanks for your help and comments!
Here is the projected cash flow:
($1,354,953) | ($989,464) | ($462,155) | ($462,155) | $2,474,935 | ($462,155) | ($657,155) | ($1,104,155) | ($717,205) | ($717,205) | $1,498,588 | $2,615,328 | $1,626,345 | ($1,201,909) | ($685,109) | ($685,109) | $2,251,981 | $4,327,696 | ($640,059) | ($1,094,559) | ($704,094) | ($704,094) | $1,507,011 | $5,951,596 | ($1,507,655) | ($1,150,655) | ($633,855) | ($633,855) | $2,303,235 | $4,378,950 | ($585,641) | ($1,040,141) | ($653,191) | ($653,191) | $1,557,914 | $5,972,499 | ($815,491) | ($508,213) | ($508,213) | $976,907 | ($505,999) | $4,401,806 | ($681,949) | ($481,799) | ($481,799) | $1,003,321 | $2,888,121 | ($454,849) | ($198,237) | ($198,237) | ($198,237) | ($198,237) | $3,171,683 |
1/1/2014 | 2/1/2014 | 3/1/2014 | 4/1/2014 | 5/1/2014 | 6/1/2014 | 7/1/2014 | 8/1/2014 | 9/1/2014 | 10/1/2014 | 11/1/2014 | 12/1/2014 | 1/1/2015 | 2/1/2015 | 3/1/2015 | 4/1/2015 | 5/1/2015 | 6/1/2015 | 7/1/2015 | 8/1/2015 | 9/1/2015 | 10/1/2015 | 11/1/2015 | 12/1/2015 | 1/1/2016 | 2/1/2016 | 3/1/2016 | 4/1/2016 | 5/1/2016 | 6/1/2016 | 7/1/2016 | 8/1/2016 | 9/1/2016 | 10/1/2016 | 11/1/2016 | 12/1/2016 | 1/1/2017 | 2/1/2017 | 3/1/2017 | 4/1/2017 | 5/1/2017 | 6/1/2017 | 7/1/2017 | 8/1/2017 | 9/1/2017 | 10/1/2017 | 11/1/2017 | 12/1/2017 | 1/1/2018 | 2/1/2018 | 3/1/2018 | 4/1/2018 | 5/1/2018 |
<colgroup><col span="12"><col><col span="26"><col><col><col><col><col span="10"></colgroup><tbody>
</tbody>
A simple XIRR calculation returned a 226.7% IRR.
This seems way too high for me, so I used IRR on the same cash flows(without dates) to return a IRR of 10.348%. From reading this forum I understand this is the rate of return for a period, which in this case is months, so I used (1+.10348)^12-1 to return an annual IRR of 225.97%, which is close to my XIRR calc.
If someone could help me out and confirm my logic & calculations are correct?
I am also concerned I did not annualize the IRR correctly. Since my project timeline is 53 months and the IRR returned a value of 10.348% monthly return, do I need my calculation to be (1+.10348)^53-1? When I do this it returns a ridiculous 18,000%, but logically if the return is 10.348% a month, wouldn't I need to include all the months of the project to get the actual IRR?
Thanks for your help and comments!