Follow Along File- [ Ссылка ]
00:00 Explanation of why IRR can be used for CAGR
00:20 Setup the model to use IRR
01:01 Create the CAGR with the IRR function
CAGR using Goalseek- [ Ссылка ]
CAGR with the RATE function- [ Ссылка ]
CAGR with the XIRR function- [ Ссылка ]
IRR can also be defined as the ‘interest rate’ that will make a series of cash flows equal given compounding movements. Similar to the RATE function, IRR needs to take a negative number to a positive number so we need to create a new set of cells that will help with the calculation.
To follow along go to 17.14
As shown below the first cell is a NEGATIVE of the Year 1 number, then we have 2 zeros (just to help Excel understand how many periods we are covering) and then the year 4 sales. Then in cell B22 we have done an IRR.
When you have two non zero cash flows, the IRR tells you how the first number gets to the last number over that period. You will see that the result is the same answer as the other methods.
