1. Using XNPV & XIRR
Now, the NPV and IRR functions are great, but as we saw in
the last example, they do have their limitations, particularly with respect
to timing. Now we can use the XNPV function, it's similar to the
NPV function, but it's going to give us the ability to input specific
dates. Now, similarly, we have the XIRR function, again, it's like the IRR
function, but we're gonna have control and the ability to input very specific
dates. So, do we really need to use these functions? Well,
yes, we do specifically, we need to use these functions when we have
uneven or unusual dates or cash flows. In real situations, we're not always
gonna be faced with a cash flow profile that's perfectly spaced out one
year to the next to the next. We might have some uneven spacing,
and this is why we need to know how to use XNPV and
XIRR. Let's jump into Excel now and see exactly how they work.
2. Let's practice!