Implement Finance::Calculations#irr using Newton's method

Author: wowinter13

README.md

@@ -9,13 +9,13 @@ which are as follows:
 
 | numpy-financial function     | ruby native function ported?   | info|
 |:------------------------:    |:------------------:  | :------------------|
-| fv                           |    |   Computes the  future value|
-| ipmt                         |    |   Computes interest payment for a loan|
-| pmt                          |    |   Computes the fixed periodic payment(principal + interest) made against a loan amount|
-| ppmt                         |    |   Computes principal payment for a loan|
-| nper                         |    |    Computes the number of periodic payments|
-| pv                           |      |   Computes the present value of a payment|
-| rate                         |      |    Computes the rate of interest per period|
+| fv                           |       |   Computes the  future value|
+| ipmt                         |       |   Computes interest payment for a loan|
+| pmt                          |       |   Computes the fixed periodic payment(principal + interest) made against a loan amount|
+| ppmt                         |       |   Computes principal payment for a loan|
+| nper                         |       |    Computes the number of periodic payments|
+| pv                           |       |   Computes the present value of a payment|
+| rate                         |   ✅  |    Computes the rate of interest per period|
 | irr                          |       |    Computes the internal rate of return|
 | npv                          |  ✅   |   Computes the net present value of a series of cash flow|
 | mirr                         |       |    Computes the modified internal rate of return|

lib/finance/calculations.rb

@@ -1,9 +1,15 @@
 # frozen_string_literal: true
 
+require 'bigdecimal'
+require 'bigdecimal/newton'
+
+include Newton
+
 module Finance
   class Calculations
     class << self
       # Npv computes the Net Present Value of a cash flow series.
+      #
       # @return [Numeric] The NPV of the input cash flow series `values` at the discount `rate`.
       #
       # @param [Numeric] :rate A discount rate applied once per period.
@@ -24,7 +30,58 @@ def npv(rate, values)
         npv_value
       end
 
+      # IRR computes the Rate of Interest per period.
+      #
+      # @return [Float] Internal Rate of Return for periodic input values.
+      #
+      # @param [Array<Numeric>] :values Input cash flows per time period.
+      #
+      # @example
+      #   require 'finance_rb'
+      #   Finance::Calculations.irr([-100, 0, 0, 74]) #=> 0.14299344106053188
+      #
+      # @see http://en.wikipedia.org/wiki/Internal_rate_of_return
+      # @see L. J. Gitman, "Principles of Managerial Finance, Brief," 3rd ed.,
+      #   Addison-Wesley, 2003, pg. 348.
+      def irr(values)
+        inflows, outflows = values.partition{ |i| i >= 0 }
+        if inflows.empty? || outflows.empty?
+          return 0.0
+        end
+
+        func = BigDecimal.limit(100)
+        func = Function.new(values)
+        rate = [ func.one ]
+        nlsolve(func, rate)
+        rate[0].to_f
+      end
+
       alias net_present_value npv
+      alias internal_return_rate irr
+
+      private
+
+      # Base class for working with Newton's Method.
+      # For more details, see Bigdecimal::Newton.
+      # @api private
+      class Function
+        def initialize(values)
+          @zero   = BigDecimal("0.0")
+          @one    = BigDecimal("1.0")
+          @two    = BigDecimal("2.0")
+          @ten    = BigDecimal("10.0")
+          @eps    = BigDecimal("1.0e-16")
+          @values = values
+        end
+        
+        def zero; @zero; end
+        def one ; @one;  end
+        def two ; @two;  end
+        def ten ; @ten;  end
+        def eps ; @eps;  end
+
+        def values(x); [Finance::Calculations.npv(x[0], @values)]; end
+      end
     end
   end
 end

spec/finance/calculations_spec.rb

@@ -12,10 +12,30 @@
       ).to eq(-85.07888805409468)
     end
 
-    it 'returns correct npv for zero rates' do
+    it 'calculates correct npv for zero rates' do
       expect(
         Finance::Calculations.net_present_value(0.0, [-2000, 55, 55, 55])
       ).to eq(-1835.0)
     end
   end
+
+  describe '#irr' do
+    it 'calculates correct irr value' do
+      expect(
+        Finance::Calculations.irr([-4000,1200,1410,1875,1050])
+      ).to eq(0.14299344106053188)
+    end
+
+    it 'calculates zero value for cashflows w/o any inflows' do
+      expect(
+        Finance::Calculations.irr([100,500,200,50])
+      ).to eq(0.0)
+    end
+
+    it 'is available through alias name' do
+      expect(
+        Finance::Calculations.internal_return_rate([-100, 0, 0, 74])
+      ).to eq(-0.09549583035161031)
+    end
+  end
 end