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<?php // RAY_irr.php
error_reporting(E_ALL);
// COMPUTE (IRR) INTERNAL RATE OF RETURN - ITERATIVE METHOD, ANNUAL
// SOME TEST DATA
$cashflow = array
( -100.0 // INITIAL INVESTMENT
, 5.0 // ANNUAL INTEREST OR DIVIDEND PAYMENTS
, 5.0
, 5.0
, 5.0
, 5.0
, 110.0 // CASH OUT
)
;
// TEST THE FUNCTION AND SHOW THE WORK PRODUCT
$irr = irr($cashflow);
echo " CASH: ";print_r($cashflow);
echo " IRR: $irr";
// DETERMINE INTERNAL RATE OF RETURN FROM AN ARRAY OF ANNUAL PAYMENTS
function irr($cashflow)
{
// DETERMINE IF GROSS CASHFLOW IS POSITIVE
$cash = round(array_sum($cashflow),2);
if ($cash == 0.0) return 0.0;
if ($cash > 0.0) $iterator = 0.0001;
if ($cash < 0.0) $iterator = -0.0001;
$interest = 0.0;
$npv = 1.0;
$years = count($cashflow) - 1;
while ( (round(abs($npv),4) > 0.0) )
{
$interest = round($interest + $iterator,4);
$year = 0;
$npv = 0.0;
while ($year <= $years)
{
$yearly = $cashflow[$year];
// DENOMINATOR IS (1 + r)**t
$denominator = pow((1+$interest), $year);
$denominator = round($denominator,6);
$npv = $npv + ( $yearly / $denominator );
$year++;
}
if (($iterator > 0.0) && ($npv < 0.0) ) break;
if (($iterator < 0.0) && ($npv > 0.0) ) break;
}
return round((($interest-$iterator) * 100.0),2);
} // END FUNCTION irr
<?php // RAY_irr.php
error_reporting(E_ALL);
// COMPUTE (IRR) INTERNAL RATE OF RETURN - ITERATIVE METHOD, ANNUAL
// SEE http://www.experts-exchange.com/Web_Development/Web_Languages-Standards/PHP/Q_28324332.html
// SOME TEST DATA
$cashflow = array
( -1000.0 // INITIAL INVESTMENT
, 400.0 // ANNUAL INTEREST OR DIVIDEND PAYMENTS
, 400.0
, 400.0
)
;
// TEST THE FUNCTION AND SHOW THE WORK PRODUCT
$irr = irr($cashflow);
echo " CASH: ";print_r($cashflow);
echo " IRR: $irr";
// DETERMINE INTERNAL RATE OF RETURN FROM AN ARRAY OF ANNUAL PAYMENTS
function irr($cashflow, $accuracy=4)
{
// DETERMINE IF GROSS CASHFLOW IS POSITIVE
$cash = round(array_sum($cashflow), $accuracy);
if ($cash == 0.0) return 0.0;
if ($cash > 0.0) $iterator = pow(10,-$accuracy);
if ($cash < 0.0) $iterator = -pow(10,-$accuracy);
$interest = 0.0;
$npv = 1.0;
$years = count($cashflow) - 1;
while ( (round(abs($npv),$accuracy) > 0.0) )
{
$interest = round($interest + $iterator,$accuracy);
$year = 0;
$npv = 0.0;
while ($year <= $years)
{
$yearly = $cashflow[$year];
// DENOMINATOR IS (1 + r)**t
$denominator = pow((1+$interest), $year);
$denominator = round($denominator,$accuracy);
$npv = $npv + ( $yearly / $denominator );
$year++;
}
if (($iterator > 0.0) && ($npv < 0.0) ) break;
if (($iterator < 0.0) && ($npv > 0.0) ) break;
}
return round((($interest-$iterator) * 100.0),$accuracy);
} // END FUNCTION irr
what is the last input option 'cash out'When analyzing multiple discounted cash flows, your investment is typically treated as a negative value and the returns of interest, dividend yields, etc., are treated as positive values. In the example, the "cash out" value would represent liquidation of the investment at a future date. This would occur if a bond matured and the principal was returned or a rental property is sold for cash.
Have i ran it right?Sort of. There is a lot of deep background involved in making these calculations. The cash flows are not usually as hard-and-fast as you see in these theoretical examples, and interest on loans usually does not compound annually; there are different compounding periods for different financial instruments. Mortgages, for example, are typically compounded continuously.
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