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I have this code to calculate IRR (Internal Rate of Return) and it works like the IRR function in Excel (we have the cashflow values and the guess rate).

This is working fine and I have the same results as the Excel function, but when the IRR tax is bigger than 100% this function doesn't work. The max value that I got is 100%.

What do I need to change to get values bigger than 100?

  // Credits: algorithm inspired by Apache OpenOffice
  
  // Calculates the resulting amount
  var irrResult = function(values, dates, rate) {
    var r = rate + 1;
    var result = values[0];
    for (var i = 1; i < values.length; i++) {
      result += values[i] / Math.pow(r, (dates[i] - dates[0]) / 365);
    }
    return result;
  }

  // Calculates the first derivation
  var irrResultDeriv = function(values, dates, rate) {

    var r = rate + 1;
    var result = 0;
    for (var i = 1; i < values.length; i++) {
      var frac = (dates[i] - dates[0]) / 365;
      result -= frac * values[i] / Math.pow(r, frac + 1);
    }
    return result;
  }

  // Initialize dates and check that values contains at least one positive value and one negative value
  var dates = [];
  var positive = false;
  var negative = false;
  for (var i = 0; i < values.length; i++) {
    dates[i] = (i === 0) ? 0 : dates[i - 1] + 365;
    if (values[i] > 0) positive = true;
    if (values[i] < 0) negative = true;
  }
  
  // Return error if values does not contain at least one positive value and one negative value
  if (!positive || !negative) return 0;

  // Initialize guess and resultRate
  var guess = (typeof guess === 'undefined') ? 0.1 : guess;
  var resultRate = guess;
  
  // Set maximum epsilon for end of iteration
  var epsMax = 1e-10;
  
  // Set maximum number of iterations
  var iterMax = 200;

  // Implement Newton's method
  var newRate, epsRate, resultValue;
  var iteration = 0;
  var contLoop = true;
  do {
    resultValue = irrResult(values, dates, resultRate);
    newRate = resultRate - resultValue / irrResultDeriv(values, dates, resultRate);
    epsRate = Math.abs(newRate - resultRate);
    resultRate = newRate;
    contLoop = (epsRate > epsMax) && (Math.abs(resultValue) > epsMax);
  } while(contLoop && (++iteration < iterMax));

  if(contLoop) return 0;

  // Return internal rate of return
  return resultRate;
}
Caps Lock
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  • Hey! I have ran into the same scenario where I want to display IRR in -ve i.e. <0 (a case where the total cashflows are less than the initial investment cost) and also handle cases where IRR > 100% – Sudhanshu Dec 10 '21 at 19:49

1 Answers1

-1
    var irrResult = function(values, dates, rate) {
    var r = rate + 1;
    var result = values[0];
    for (var i = 1; i < values.length; i++) {
      result += values[i]/ Math.pow(r, (dates[i] - dates[0]) );
    }
    return result  / 365;
  }
Yoel Diamant
  • 1