XIRR vs. CAGR vs. IRR
Basis | XIRR | CAGR | IRR |
---|---|---|---|
Calculation Nature | It is an expansion of the IRR to account for erratic time periods and erratic cash flow. | determines an investment’s yearly growth rate over a certain time frame. | It is the discount rate at which an investment’s cash flow NPV (Net Present Value) drops to zero. |
Events related to Cash Flow | A number of inflows and/or outflows occurring at regular or irregular intervals | One inflow and only one outflow | Several Inflows and/or Outflows Occurring Regularly |
Type of Return | Compounding | Compounding | Compounding |
Timing Considerations | Takes into account the cash flow timings. | Ignores the timing aspects of cash flows. | Considers the timings of cash flows. |
Level of Complexity | Higher | Lower | Medium |
Accuracy | Higher | Lower | Medium |
Versatility | Higher (Adjustable to a wider variety of investing circumstances. It takes timings and cash flow abnormalities into account.) | Lower (Used exclusively to assess the yearly growth rate. | Lower (Works best for projects with steady financial flows.) |