# Internal Rate of Return (IRR) problem

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This topic contains 4 replies, has 2 voices, and was last updated by  nokia 1 year, 10 months ago. This post has been viewed 42 times

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• #51231

nokia
Moderator

Hi,
If a project has the following cash flows:

Yr0 (100)
Yr1 25
Yr2 25
Yr3 30

What would be its IRR and how would we calculate that?

#92708

John Moffat
Keymaster

There is no IRR. (In theory there is, but it is negative and would be meaningless).

The reason is that that the NPV is negative whatever the rate of interest is (even if interest rate was zero, the NPV would be negative), and therefore the project is never worth accepting.

#92709

nokia
Moderator

Ok… But isn’t there any way to calculate that negative IRR? How does excel calculates that?

#92710

John Moffat
Keymaster

You can approximate it the normal way by making two guesses.

I don’t know about excel – I never use excel for it because I am only ever doing it for exam purposes

#92711

nokia
Moderator

Ok thanks alot. i have calculated that finally

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