An alternative definition of the IRR is the rate which makes the principal at the beginning of year 6 equal to zero. 9 This is shown in the printout above, in which cell E9 gives the principal at the beginning of year 6. Using the Goal Seek function of Excel, find this rate (below we illustrate how the screen should look).

(Of course you should check your calculations by using the Excel IRR function.)

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A в H. 3.00% 1 IRR? Division of payment LOAN TABLE between. Principal Payment Year at beginning at end Interest Principal of year Cash Year flow of year -800 800.00 524.00 300 00 20 Goal Seek 15 300 200 150 339.72 199.91 12 Set cell: 13 SES9 122 83.91 To value: 133 46.57 <-- 10 By changing cell: $8$1 11 12 IRR 5.07% This uses the Excel formula =IRR(B4:B9) Cancel OK 13 234 56 0123 A5 34567o99