In financial markets, the time value of money is always taken into account. It is assumed that if an investment provides a series of cash inflows, they can be re-invested to earn a positive return. Alternatively, an investment that does not have intermediate cash-flows, is assumed to grow at an annual rate each year, to be compounded every year to reach the final value. The compounded annual growth rate (CAGR) of an investment is the underlying compound interest rate that equates the end value of the investment with its beginning value.
CAGR => r = ((FV/PV)^(1/n))-1
The XIRR function is particularly useful when CAGR has to be computed for a series of cash flows, rather than with just a beginning and ending value of the investment. XIRR for a particular set of cash flows can be calculated in EXCEL with the XIRR formula
CAGR => r = ((FV/PV)^(1/n))-1
The XIRR function is particularly useful when CAGR has to be computed for a series of cash flows, rather than with just a beginning and ending value of the investment. XIRR for a particular set of cash flows can be calculated in EXCEL with the XIRR formula
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