Solution by Spreadsheet
The fastest way to fi nd i * is to use the RATE function ( Equation [7.4] ). The entry
RATE(10,15000,200000,300000) displays i * 10.55% per year. It is equally correct to
use the IRR function. Figure 7–4 , column B, shows the cash fl ows and IRR(B2:B12)
function to obtain i *.
For a complete spreadsheet analysis, use the procedure outlined above.
1. Figure 7–3 shows cash flows.
2. Equation [7.6] is the ROR relation.
3. Figure 7–4 shows the net cash flows in column B.
4. The IRR function in cell B14 displays i * 10.55%.
5. To graphically observe i * 10.55%, column D displays the PW graph for different
i values. The NPV function is used repeatedly to calculate PW for the xy scatter
chart.