Crystal Reports and Financials: IRR

In three other articles, we talk about NPV (Net Present Value), which 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

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.

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