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Crystal Reports: XIRR and XNPV Functions

In our financials series of articles, we explain IRR and NPV. Not surprisingly, Crystal Reports has functions for IRR and NPV. These are important financial calculations.

But what if your investment does not have annual returns? Some investments have an irregular set of returns. This situation can make IRR or NPV impossible to calculate using standard IRR or NPV equations (or functions), unless you have the time and patience to create a matrix of calculations for that purpose.

In these cases, use the XNPV and XIRR functions. The arguments of these functions is very similar to the NPV and IRR functions:

XNPV(rate, values, dates)

XIRR(values, dates) or XIRR(values, dates, rateguess)

The values and dates are both arrays (a list) of values and dates and must have the same number of values and dates to show the irregular payments and receipts. They will then calculate the Net Present Value or Return on your investment.

So, what is IRR?

NPV (Net Present Value is the financial tool that senior managers use to make financial decisions. (And they do that because NPV allows them to work in terms of cash flow).

Another common financial tool, used primarily by lower-level managers, is IRR (Internal Rate of Return). In Crystal Reports, the IRR function takes a list of values and calculates the rate of return of that cash flow. There must be at least one negative (payment) value and one positive (receipt) value in the list.

Suppose your project has an initial cost of $30,000 and receipts of $8000, $15,000 and $25,000 over the life of the project then the formula would read

IRR ([-30000, 8000, 15000,25000])

This will calculate a value of 0.227 indicating a 22.7% return on the initial investment.

IRR and NPV are related. Combine them in the formula and you will calculate a zero value.

NPV (IRR (values), values)

More about NPV

The NPV function takes a rate and series of cash payments and receipts to calculate what that cash flow is worth at the current point of time. Suppose your project has annual cash flows of $1000, $2000, $1500 and $1200 over the life of the project and your cost of capital is 5%. Then the cash flow function

NPV (0.05, [1000, 2000, 1500, 1200])

This will calculate a value of $5049.44. This is less than the sum of the individual values as you have to wait for the payments.

The rate is a decimal number and a 5% investment rate is entered as 0.05. The cash flows can be positive or negative numbers. Most projects have a large negative value at the start, and a series of positive returns over the life of the project.

 

 

This article is copyrighted by Crystalkeen, Mindconnection, and Chelsea Technologies Ltd. It may be freely copied and distributed as long as the original copyright is displayed and no modifications are made to this material. Extracts are permitted. The names Crystal Reports and Seagate Info are trademarks owned by Business Objects.