The formula
How it works
Find the internal rate of return of an investment from its cash flows. Enter the initial amount you put in and the series of returns you receive each period — the calculator finds the rate that breaks even.
FAQ
What does the IRR tell me?
It is the annualised (or per-period) return the investment effectively earns, accounting for the timing of every cash flow. If the IRR is higher than your required return or the cost of borrowing, the investment adds value; if it is lower, it does not.
How do I enter the cash flows?
Put the initial investment in its own box as a positive number — the calculator treats it as money going out. Then list the amounts you receive each period, separated by commas or spaces. Enter a period with no cash flow as 0, and a period where you pay in more as a negative number.
What is the difference between IRR and NPV?
Net present value discounts cash flows at a rate you choose and gives a dollar amount, while IRR instead solves for the discount rate that makes that dollar amount zero. They are closely related — a project has a positive NPV at any discount rate below its IRR — but IRR is a percentage, which makes comparing differently sized investments easier.
Can a set of cash flows have more than one IRR?
Yes, if the cash flows change sign more than once — for example an outflow, then inflows, then another outflow — the equation can have multiple valid solutions or none at all. In those cases IRR alone can be misleading, and comparing NPV at your actual required return is more reliable.
Why might my cash flows show no IRR?
If every cash flow is positive, or every one is negative, there is no discount rate that brings the net present value to zero, so no IRR exists. This can also happen with unusual patterns where the present-value equation never crosses zero.
What counts as a good IRR?
There is no universal threshold — a good IRR is simply one that beats your cost of capital, the return of comparable alternatives, or the minimum return you require given the investment’s risk. Riskier ventures like startups typically need a much higher IRR to be worthwhile than safer ones like bonds.
Does IRR assume the cash flows are reinvested?
Yes, the standard IRR calculation implicitly assumes interim cash flows are reinvested at the same IRR rate, which can be unrealistic for high IRR values. This is a well-known limitation, and measures like modified IRR (MIRR) address it by using a separate, more realistic reinvestment rate.
About the IRR calculator
This calculator finds the internal rate of return (IRR) of a project or investment — the single discount rate at which the present value of all its cash flows equals zero. IRR is one of the most widely used measures for judging whether an investment is worthwhile, because it boils an entire stream of ins and outs down to one comparable percentage. The calculator solves for it numerically from the numbers you enter.
How to use it
Enter the initial investment as a positive amount, then list the cash flows you receive in each following period, separated by commas. The calculator returns the IRR along with the total received and the net gain. For example, investing $1,000 and receiving $400 a year for four years gives an IRR of about 22% — the effective annual return that makes the deal break even.
The formula
The IRR is the rate that satisfies , where is the initial outflow and each later cash flow. There is no algebraic solution, so the calculator searches for the rate that makes the net present value zero, testing values until the equation balances. The same period length applies to every cash flow.
Where it is used
Businesses use IRR to rank capital projects and decide which to fund, and investors use it to compare opportunities with different sizes and timings on an equal footing. It underpins private equity, real estate and venture returns, where cash flows are irregular. Because it captures the timing of money, IRR is a more complete measure than a simple total return, though it is usually read alongside net present value.