Forum Discussion
IRR calculation and circular reference
I have a set of cash flow figures for which I am trying to calaculate the IRR. However the final or terminal value in the series is calculated use the IRR result and so of course gives a circular ref...
The IRR calculation can be unstable - it tries to iteratively zero in on the correct value, but depending on the flows, that's not always possible and the starting value can be important. In addition, there are certain flows the IRR calculation can't handle.
An alternative is to create a formula that includes the interest rate. Apply the interest rate to the cash flow and summate the cash flows. Then goal seek the percentage such that the total of the cash flows is zero.
An alternative is to create a formula that includes the interest rate. Apply the interest rate to the cash flow and summate the cash flows. Then goal seek the percentage such that the total of the cash flows is zero.