# Internal Rate of Return (IRR) problem

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• nokia
Moderator
• Topics: 1
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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?

John Moffat
Keymaster
• Topics: 3
• Replies: 5949

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.

nokia
Moderator
• Topics: 1
• Replies: 63

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

John Moffat
Keymaster
• Topics: 3
• Replies: 5949

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

nokia
Moderator
• Topics: 1
• Replies: 63

Ok thanks alot. i have calculated that finally

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