Div 0 Error In Irr Formula
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Schneider Guest Does anyone have any experience with Excel returning the DIV/0! error when using the IRR function? I also think that it seems to return implausible IRRs when the data gets closer and closer to creating a DIV/0! error. My data clearly has an IRR that http://www.pcreview.co.uk/threads/div-0-error-when-using-irr-function.1760970/ Excel should be able to calculate! Erik Schneider, Jun 11, 2004 #1 Advertisements Norman Harker Guest https://sites.google.com/a/xlri.ac.in/profmohanty/spreadsheet-tricks-1/gettingirrinexcel Hi Erik! We need a bit of data on the cash flows that are producing the error. The most common cause of #DIV/0! is the wrong signage of the cash flows. But you can get it with very large differences between the (absolute) sums of negatives and positives. However, try it with a guess rate of -0.9 -- Regards Norman Harker MVP (Excel) Sydney, Australia "Erik Schneider" <> div 0 wrote in message news:1b0e101c44fb3$2849c500$... > Does anyone have any experience with Excel returning the > DIV/0! error when using the IRR function? I also think > that it seems to return implausible IRRs when the data > gets closer and closer to creating a DIV/0! error. My > data clearly has an IRR that Excel should be able to > calculate! Norman Harker, Jun 11, 2004 #2 Advertisements Erik Schneider Guest Dear Norman: Thank you for your interest in my problem. Here are div 0 error the cash flows starting with the earliest one first: 19,415 1,821 (18,856) (18,856) (18,856) 6,688 32,500 32,500 32,500 32,500 13,085 0 0 0 0 30,750 Thanks again, Erik Schneider >-----Original Message----- >Hi Erik! > >We need a bit of data on the cash flows that are producing the error. > >The most common cause of #DIV/0! is the wrong signage of the cash >flows. But you can get it with very large differences between the >(absolute) sums of negatives and positives. > >However, try it with a guess rate of -0.9 > >-- >Regards >Norman Harker MVP (Excel) >Sydney, Australia > >"Erik Schneider" <> wrote in message >news:1b0e101c44fb3$2849c500$... >> Does anyone have any experience with Excel returning the >> DIV/0! error when using the IRR function? I also think >> that it seems to return implausible IRRs when the data >> gets closer and closer to creating a DIV/0! error. My >> data clearly has an IRR that Excel should be able to >> calculate! > > >. > Erik Schneider, Jun 11, 2004 #3 Norman Harker Guest Hi Erik! It's because of the extraordinarily high rate of return: If you use: A18: =NPV(B18,A1:A16) Start with B1 at 10% Returns: 53607.1410572591 Now use GoalSeek Target for the NPV cell is 0 Cell to change is B18 GoalSeek finds a solution of: 1966552176.11655% Even if you slot that solution into your IRR formula, Excel still doesn't like it. Where can a I get a slice of this type of return?
Financial Modeling Spreadsheet Tricks Excel 2010 Useful Links Useful Data Archives Meet Prof. Mohanty Click here to read about Prof. Mohanty Spreadsheet Tricks > Getting IRR in Excel posted Aug 31, 2011, 3:13 AM by Pitabas Mohanty [ updated Aug 31, 2011, 3:35 AM ] I often use the IRR function in Excel before investing in any insurance product. And it often gives satisfactory result. However, sometimes, we get error values (#NUM! or #Div/0! error) as an output from the IRR formula. If you visit the Help Menu in Excel, it tells us that the IRR function tries to find the correct answer using iterative method and it tries for a maximum of 20 iterations. In fact, the exact wordings are: "IRR cycles through the calculation until the result is accurate within 0.00001 percent. If IRR can't find a result that works after 20 tries, the #NUM! error value is returned."I did some research on this function using the trial-and-error method. I will share the first finding here. IRR formula never gives an IRR value that is less than -45.03%. Let's take a simple example. Suppose, I invest $10mn in a project today and get back $5.5mn next year. Then Excel will give -45% as the IRR. You change the year#1 cash flow to $5.496mn and you get #NUM! error. So Excel does not seem to like any IRR value that is lower than -45%.! I am not sure what iteration method they use. So I tried a very simple iteration method, as explained in the following two figures:I could reach the correct answer within 6 iterations. But Excel cannot get it in 20 iterations!!! (See C1 where I show Excel answers). I am showing the formulas in the following figure:So Excel seems to be using some old method to find the IRR of cash flows. In case Excel gives you an error value, just use a simple iterative method like the above. Comments Sign in|Report Abuse|Print Page|Powered By Google Sites