# Be Careful Excel Warning

If you are using Excel 2013, I’m sure you must have encountered be careful Excel warning. When you try to save a workbook, suddenly a pop-up appears saying ‘Be careful! Parts of your document may include personal information that can’t be removed by the Document Inspector.’ It is definitely annoying, but also this feature is necessary to prevent unintended personal information leakage. There is always a balance between ease of use and privacy. If you are sharing a workbook and don’t want the recipient to know who wrote the original document, such privacy options come very handy. The dialog pop-up

# What is Incremental IRR?

Incremental IRR is a way to analyze the financial return when there are two competing investment opportunities involving different amounts of initial investment. In this post we will explore how to calculate incremental IRR and how it helps in deciding between two projects with different investment. Let’s consider a project with following cash flow stream: Assume 10% discount rate. The IRR/NPV can be calculated by using Excel IRR/NPV functions. The project IRR is 13.27% and the NPV is 128.5. Now let’s consider another project with following cash flow stream: The IRR for this project is 12.78% and the NPV is

# The Curious Case of Negative IRR

Negative IRR indicates that the sum of post-investment cash flows is less than the initial investment; i.e. the non-discounted cash flows add up to a value which is less than the investment. So yes, both in theory and practice negative IRR exists, and it means that an investment loses money at the rate of the negative IRR. In such cases the net present value (NPV) will always be negative unless the cost of capital is also negative, which may not be practically possible. However, note that a negative NPV doesn’t always mean a negative IRR. It simply means that the

# How to Create Hatched Charts in Excel

Hatched charts in Excel look beautiful. They look cool and professional. Hatching or shading between plotted lines enhances charts and helps to convey the story. Creating hatched charts in Excel is rather easy (I’m using Excel 2013). For this illustration we will be using following set of data: First hatched graph we will create for sales number only. Go to insert<Charts<Insert Area Charts. Insert the simple 2D area chart. Now copy and paste the sales data into it. The graph will look like this. Now format the axis label to include the years corresponding to the sales. You can format

# Shareholder Loan and Equity IRR

Many a time I’m requested to explain the relation between shareholder loan and the equity IRR. Should shareholder loan be part of equity IRR calculation? And if there are more than one equity investor, what should we do! Shareholder loan is a debt-like form of financing provided by the shareholders. Usually, it is the most junior debt in the company’s debt portfolio, and since this loan belongs to shareholders it should be treated as equity. We have discussed the relation between project IRR and Equity IRR earlier. In this post we will be discussing only about the shareholder loan and

# How Does Excel Calculate IRR?

Have you ever wondered how does Excel calculate internal rate of return (IRR)? I never gave it second thought until I wrote a post on the issues with NPV calculation in Excel. Our reader, Deyan, pointed that similar type of issue can exist with the IRR calculation in Excel. IRR calculation in Excel is rather simple; it follows the following syntax: Internal Rate of Return = IRR(values, [guess]) Where values are the cash flows. Values must contain at least one positive number and one negative number. Also note that it uses the order of values to interpret the order of

# NPV Calculation in Excel: Why the Numbers do not Match!

NPV calculation in Excel can be tricky. I have written few posts on this subject – NVP & IRR – Key Metrics of a Feasibility Analysis and Net Present Value and Returns to the Equity Holders. I recommend that you read them too. The basics of net present value (NPV) have been discussed on this site on many occasions. In this post we will be discussing the NPV formula in Excel and why the result may differ from the manual calculation. For this, we will consider a simple investment of 500$ in a project which generates 10$ each year in

# Rental Yield and Project IRR [Video]

Are Rental Yield and Project IRR related? Can we calculate the project IRR, if we know the rental yield? In the video we are discussing the relation between rental yield and project IRR. If you have any thoughts, use the comment section below.