[R] Secant Method Convergence (Method to replicate Excel XIRR/IRR)

Wed Aug 25 23:24:06 CEST 2010

Another approach is to use `uniroot' to find the zero of the NPV function:

npv <- function (cashFlow, irr) {
n <- length(cashFlow)
sum(cashFlow / (1 + irr)^{0: (n-1)})
}

uniroot(f=npv, interval=c(0,1), cashFlow=cashFlow)

However, there may be situations where there are no real zeros or there are
multiple zeros of the NPV function.

Ravi.

-----Original Message-----
From: r-help-bounces at r-project.org [mailto:r-help-bounces at r-project.org] On
Sent: Wednesday, August 25, 2010 8:39 AM
To: r-help at r-project.org
Subject: [R] Secant Method Convergence (Method to replicate Excel XIRR/IRR)

Hi,

I am new to R, and as a first exercise, I decided to try to implement an
XIRR function using the secant method.  I did a quick search and saw another
posting that used the Bisection method but wanted to see if it was possible
using the secant method.

I would input a Cash Flow and Date vector as well as an initial guess.  I
hardcoded today's initial date so I could do checks in Excel.  This code
seems to only converge when my initial guess is very close to the correct
IRR.

Maybe I have some basic errors in my coding/logic? Any help would be greatly
appreciated.

The Wikipedia article to secant method and IRR:
http://en.wikipedia.org/wiki/Internal_rate_of_return#Numerical_solution

Thanks!

ANXIRR <- function (cashFlow, cfDate, guess){
cfDate<-as.Date(cfDate,format="%m/%d/%Y")
irrprev <- c(0); irr<- guess

pvPrev<- sum(cashFlow)
pv<-
sum(cashFlow/((1+irr)^(as.numeric(difftime(cfDate,"2010-08-24",units="days")
)/360)))
print(pv)
print("Hi")

while (abs(pv) >= 0.001) {
t<-irrprev; irrprev<- irr;
irr<-irr-((irr-t)*pv/(pv-pvPrev));
pvPrev<-pv;

pv<-sum(cashFlow/((1+irr)^(as.numeric(difftime(cfDate,"2010-08-24",units="da
ys"))/365)))
print(irr);print(pv)
}
}

Please consider the environment before printing this e-mail.

[[alternative HTML version deleted]]

______________________________________________
R-help at r-project.org mailing list
https://stat.ethz.ch/mailman/listinfo/r-help