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Reverse XIRR to find price

  1. #1
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    Smile Reverse XIRR to find price

    This might be a simple answer but I can't get my head around it at the moment. XIRR is fantastic but I am trying to work out the initial price for something based on the XIRR. i.e. if I want to achieve 9% XIRR and I have a series of known irregular payments in the meantime how can I calculate the initial price? I have attached a sample spreadsheet which outlines it in more detail.

    Thanks again in advance!
    Attached Files Attached Files

  2. #2
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    Re: Reverse XIRR to find price

    Is this even possible? I have looked at what the actual XIRR formula is and it is crazy!

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    Re: Reverse XIRR to find price

    Put the XIRR formula in A5, a starting number in B5 (e.g., -100) and use Solver to set A5 to 9% by changing B5. Result ~-102.95.
    Entia non sunt multiplicanda sine necessitate

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    Re: Reverse XIRR to find price

    If you were to use solver would this mean manually altering/adjusting it each time. I have hundreds of these and ideally its a case of saying 10% XIRR and it says cost = 100 or 9% XIRR cost = 110. And then you just change the XIRR figure for all one hundred of them

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    Forum Expert shg's Avatar
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    Re: Reverse XIRR to find price

    I have no suggestion for how to achieve that ideal.

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    Re: Reverse XIRR to find price

    Thanks anyway, your feedback is appreciated

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    Re: Reverse XIRR to find price

    You could use VBA to go down your list and have it apply Solver (or wouldn't it be GoalSeek) to each line. Then you hit the button once and it updates all your calculations.

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    Re: Reverse XIRR to find price

    That could work! The only issue though would be that you when you use Solver or GoalSeek it doesn't seem to allow you to have the target value as a variable running from another cell. You have to actually input the target value into the Solver Parameters. Is that right?

  9. #9
    Forum Contributor bentleybob's Avatar
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    Re: Reverse XIRR to find price

    That's true. But if you use VBA, you make the target CELL equal to the calculated value minus your target value, and then the inputted "target" is zero.

  10. #10
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    Re: Reverse XIRR to find price

    What about just discounting your cash flows by your required return? Wouldn't that be the easiest?

  11. #11
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    Re: Reverse XIRR to find price

    Elaborating on what I think the last poster meant

    1) Take the NPV of your forward looking cashflows and discount it by your required IRR (ie =XNPV(A5,B5:E5,B1:E1)
    2) Take the negative of this number to solve your initial price (-102.95 in this example)

    xirr.PNG
    Last edited by brettdj; 03-10-2012 at 11:32 PM.

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