IRR Calculator
Compute the Internal Rate of Return for any investment. Enter your initial outlay and each year's cash flow.
Entered as a positive number — the calculator treats Year 0 as an outflow automatically.
Use positive values for income/returns, negative for additional investments in that year.
Modest return — beats inflation but little risk premium
At your discount rate of 8%, this project's NPV is $176.29 — it creates value.
Cash flow breakdown at 8%
| Year | Cash Flow | Discount Factor | Present Value |
|---|---|---|---|
| 0 | -$10,000.00 | 1.0000 | -$10,000.00 |
| 1 | $3,000.00 | 0.9259 | $2,777.78 |
| 2 | $4,000.00 | 0.8573 | $3,429.36 |
| 3 | $5,000.00 | 0.7938 | $3,969.16 |
| NPV at 8% | $176.29 | ||
About the IRR Calculator
The Internal Rate of Return (IRR) is the annualised return an investment generates over its lifetime — specifically, it's the discount rate that makes the Net Present Value (NPV) of all cash flows equal to zero. IRR is one of the most widely used profitability metrics in finance, real estate, and capital budgeting because it produces a single percentage figure that's easy to compare against alternatives like a bond yield, a savings rate, or your cost of capital.
This calculator takes your initial investment (Year 0) and any number of yearly cash flows, then solves for the IRR using a Newton-Raphson method with a bisection fallback for tricky cases. It also computes the NPV at your chosen discount rate (your hurdle rate or cost of capital) so you can see whether the project creates or destroys value.
All calculations run locally in your browser. No financial data is sent to any server, stored in a database, or shared with third parties.
How to Use the IRR Calculator
- Pick your currency — choose dollars, pounds, euros, or yen. The math is currency-agnostic; this only affects display.
- Enter your initial investment — type the upfront amount as a positive number. The calculator automatically treats Year 0 as an outflow.
- Add yearly cash flows — for each year of the investment, enter the net cash received. Use positive numbers for income and negative numbers if you put more money in.
- Set your discount rate — enter your hurdle rate, cost of capital, or the return you'd get on a comparable safe investment. Used to compute NPV.
- Read the results — the IRR appears with a quality label (Excellent, Good, Modest, Low, or Loss), plus your total invested, total returns, net profit, and return multiple.
- Inspect the breakdown — the per-year table shows each cash flow's discount factor and present value so you can see exactly how NPV is built.
Common Use Cases
Real Estate Investments
Evaluate a rental property: enter the purchase price as the initial investment, annual net rental income as cash flows, and the eventual sale proceeds in the final year.
Business Projects
Compare capital projects competing for the same budget. The project with the highest IRR (above your cost of capital) is usually preferred.
Equipment Purchases
Decide whether a new machine pays for itself. Use the equipment cost as the investment and the annual savings or extra revenue it generates as cash flows.
Private Equity & Venture
Model a fund or angel investment with a long J-curve: negative early years (additional capital calls), zero or small middle years, and a large final exit value.
Bond Yields
A bond's yield-to-maturity is just an IRR. Enter the bond's price (as investment) and the future coupon payments + principal repayment as cash flows.
Renewable Energy Projects
Score a solar or wind installation: panel and installation cost upfront, electricity savings or feed-in tariff revenue every year, perhaps a salvage value at end-of-life.
Frequently Asked Questions
What is IRR in simple terms?
IRR is the effective annual interest rate your investment earns. If you put $10,000 into a project and get back cash flows that "feel like" 12% interest in a savings account over the same period, then the IRR is 12%.
What's the difference between IRR and ROI?
ROI is a simple ratio: (total return − total invested) ÷ total invested, with no regard for time. IRR is time-weighted — it accounts for when cash arrives. $10,000 returned next year is worth more than $10,000 returned in 10 years, and IRR captures that. ROI doesn't.
What is a "good" IRR?
It depends on the risk and the alternatives. A common rule of thumb: 8–10% is comparable to long-run stock market returns, 10–15% is solid for real estate, 20%+ is typical for venture-style risk. The key benchmark is your cost of capital — IRR must clear it to create value.
Why do I need a discount rate if I'm computing IRR?
IRR is computed independently of any discount rate. The discount rate you enter here is used only for the NPV figure and the present-value breakdown table. A project with IRR above your discount rate has positive NPV; below it has negative NPV.
Can IRR be negative?
Yes. If you put in more money than you ever get back, the IRR is negative — your investment shrinks each year on a compound basis. A negative IRR is mathematically valid and useful as a warning sign.
What are the limitations of IRR?
IRR has a few well-known issues: it assumes cash flows are reinvested at the IRR itself (often unrealistic), it can produce multiple values when cash flows switch signs more than once, and it can favour smaller projects with higher percentage returns over larger projects that create more total value. For these cases, NPV is the more reliable metric.
Do all cash flows have to be yearly?
This calculator assumes annual periods, which is the most common convention. If your cash flows are monthly or quarterly, you can either aggregate them to yearly totals or treat each row as a "period" — then multiply the resulting IRR by 12 or 4 to convert to an approximate annual rate.
How accurate is the IRR result?
The calculator uses Newton-Raphson iteration with a bisection fallback, both standard numerical methods, and converges to within 1 cent of NPV-zero — well below the precision you'd ever need for real-world decisions. Results match Excel's IRR function to 4+ decimal places in typical scenarios.