Internal Rate of Return Method (IRR)

IRR.java

import java.math.BigDecimal;

public class IRR {

    //Approximate number of days between 2 successive cash flows. Eg. For monthly cash flows interval will be 30
    private static final int INTERVAL = 30;

    public static BigDecimal getAnnualIrr(double[] cash_flows) {
        return calculateIrrRecursively(BigDecimal.valueOf(1.0), BigDecimal.valueOf(100.0), BigDecimal.valueOf(1.0), cash_flows);
    }

    public static BigDecimal calculateIrrRecursively(BigDecimal start, BigDecimal end, BigDecimal precision, double[] cash_flows) {
        BigDecimal test_rate = start;
        BigDecimal sum;
        Double previous_diff = null;

        double final_cash_flow = cash_flows[cash_flows.length - 1];

        while (test_rate.compareTo(end) != 1) {
            sum = new BigDecimal(0);
            for (int i = 0; i < cash_flows.length - 1; i++) {
                double current_cash_flow = cash_flows[i];

                int days_in_between = getDaysInbetween(i, cash_flows.length);

                BigDecimal calc_value = (BigDecimal.valueOf(1).add(test_rate.divide(BigDecimal.valueOf(100))));
                sum = sum.add(BigDecimal.valueOf(current_cash_flow * Math.pow(calc_value.doubleValue(), (days_in_between / 365.0))));
            }

            double difference = (Math.abs(final_cash_flow) - Math.abs(sum.doubleValue()));
            if (previous_diff == null) {
                previous_diff = difference;
            }

            if (difference < 1 && difference > -1) {
                return returnCorrectTestRate(precision, test_rate, previous_diff, difference);
            } else if ((previous_diff < 0 && difference > 0) || (previous_diff > 0 && difference < 0)) {
                if ((precision.divide(BigDecimal.valueOf(10))).compareTo(BigDecimal.valueOf(0.001)) == -1) {// precision/10 < 0.001
                    return returnCorrectTestRate(precision, test_rate, previous_diff, difference);
                } else {
                    return calculateIrrRecursively(test_rate.subtract(precision), test_rate, precision.divide(BigDecimal.valueOf(10)), cash_flows);
                }
            } else {
                previous_diff = difference;
                test_rate = test_rate.add(precision);
            }
        }
        return end.subtract(precision);
    }

    private static BigDecimal returnCorrectTestRate(BigDecimal precision, BigDecimal test_rate, double previous_diff, double difference) {
        if (Math.abs(difference) < Math.abs(previous_diff)) {
            return test_rate;
        } else {
            return test_rate.subtract(precision);
        }
    }

    private static int getDaysInbetween(int current_iteration, int total_cash_flows) {
        return (total_cash_flows - current_iteration) * INTERVAL;
    }
}