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Calculating IRR using XIRR to calculate interest

  1. #1
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    Calculating IRR using XIRR to calculate interest

    I am working on a lease schedule which has payments at uneven intervals. I calculate the IRR using the Nominal XIRR function. Now, I am applying this rate to calculate the interest for each period. But the net result does not get the total cash inflow / outflow and interest to zero out.

    Example below:

    Date:
    31 Mar 2019
    20 Apr 2019
    20 May 2019
    20 Jun 2019

    Cashflows for respective dates:
    (533,636)
    180,000
    180,000
    180,000

    XIRR using nominal formula - 8.641%

    Interest for each period:
    0
    2527
    2529
    1311

    The cashflows does not get me to zero, I am left with a $3 balance.

    Not sure what I am doing wrong.
    Last edited by sgcray; 01-25-2019 at 06:09 PM. Reason: XIRR

  2. #2
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    Fort Lauderdale
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    Excel 2018
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    Re: Calculating IRR using XIRR to calculate interest

    I've not used XIRR before, I did learn that it calculates using compound interest. However, when I manually calculated the compound interest rate to zero out the balance on the last payment, that rate is 8.61054% compounded daily using a 365 day year; and when i calculate using XIRR I get 8.99096518754959%

    When I manually calculate simple interest using a 365 day year, I calculate 8.63615%

    Sorry that I could not help more. This was an interesting link: math.stackexchange.com/questions/60912/xirr-and-interest-rate-calculation.

    For Simple Interest, I calculate $2,525.24, $2,528.11, and $1,310.65.
    Last edited by theclockmaker; 01-26-2019 at 02:36 AM.

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