The following investment cash flows have been entered into cells B5 through B9 of an EXCEL spreadsheet. B5 $(5,200 ), B6 $2,100, B7 $1,300, B8 $1,800, B9 $1,200, where $5,200 is the cost of the investment and the following amounts are cash flows at the end of years one through four. The correct function for computing the yield on this investment is

Question

Quizplus · Accepted Answer

IRR is the correct function for computing the yield on an investment. The IRR function calculates the internal rate of return, which is the discount rate that makes the net present value of a series of cash flows equal to zero. In this case, the cash flows are in cells B6:B9, and the cost of the investment is in cell B5. The IRR function will calculate the discount rate that makes the net present value of these cash flows equal to zero.

The Following Investment Cash Flows Have Been Entered into Cells