XIRR hitting an upper limit?

[judgepax]

Haven't worked with XIRR before and couldn't find much help online, so thanks to anyone with the know how...

Boss is writing a proposition: If purchase a new $76k piece of equipment, will save $16k/mo in labor costs. So I have:

01/01/01 -$76,000 XIRR in Cell C2 = XIRR($B$1:$B2,$A$1:$A2)
01/31/01 $16,000 -100.0%
02/28/01 $16,000 - 99.9%
03/31/01 $16,000 - 93.6%
04/30/01 $16,000 - 56.5%
05/31/01 $16,000 23.5%
...

So all well and good that the Customer breaks even in Month # 5, but Boss wants to sell the XIRR at 5 years vs. 10 years. Problem I am running into is at Month # 48 I have a 914.8% XIRR and this only changes to 915.0% by the end of Month #120. That just doesn't sound right. Believe I've set everything up correctly (have even tried an annual version = 251%) but I get the same result that after about four years the XIRR just maxes out.

I've changed my Excel2007 Options to "Enable iterative claculation", Maximum Iterations 10,000, Maximum Change 0.001 but no impact. Any ideas? Thanks.

 

[shg]

I think it would be more meaningful to just compute the rate of return as 192K/76K = 253% per year out to the life of the equipment.

XIRR is calculating the rate (say, the inflation rate) at which the NPV of a 76K investment returning 16K/mo is zero.

EDIT: But take any finance guy's opinion over mine!