IRR Calculator
Find the internal rate of return of a cash flow stream.
Comma-separated, one per year
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How it works
The internal rate of return, or IRR, is the single annualised rate of return a project earns, expressed as the discount rate at which its net present value equals zero. This IRR calculator takes your initial investment and the yearly cash flows the project produces, then searches for the rate that exactly balances the discounted inflows against the upfront cost. IRR is intuitive because it is a percentage you can compare directly against a hurdle rate or the cost of capital: if the IRR exceeds the rate you require, the project is attractive. It is widely used in capital budgeting, private equity, and real estate to summarise an investment's performance in one figure. The calculator solves for IRR numerically, because there is no simple algebraic formula once a project has more than one or two cash flows, and it returns the rate as a percentage. Bear in mind that IRR assumes interim cash flows are reinvested at the IRR itself, which can overstate returns, and that projects with cash flows switching sign more than once may have several IRRs. For those reasons analysts often report IRR alongside NPV.
0 = −C₀ + Σ CFₜ / (1 + IRR)ᵗ
The internal rate of return is the discount rate that makes a project's net present value exactly zero, so the discounted inflows just equal the initial outlay. There is no closed-form solution for more than a couple of periods, so the calculator solves it numerically by testing rates and narrowing the range until the net present value is essentially zero. That break-even rate is the project's effective compound annual return.
Source:Discounted cash flow analysis
We review all our tools from time to time to ensure accuracy.
Worked example
How to use this calculator
- 1
Enter your values
Enter initial investment and yearly cash flows.
- 2
Adjust the options
Fine-tune any options to match your situation.
- 3
Read your result
Internal rate of return updates instantly as you type — no button to press.
Frequently asked questions
What is the internal rate of return?
The internal rate of return is the discount rate at which a project's net present value is zero, meaning the present value of its cash inflows exactly equals the initial investment. It represents the effective compound annual return the project delivers. You compare it against your required rate of return: an IRR above that threshold signals an attractive investment.
How is IRR calculated?
Because there is no direct algebraic formula for more than a couple of periods, IRR is found by trial and error, testing discount rates until the net present value lands on zero. This calculator automates that search, rapidly narrowing the range until it converges on the rate. Spreadsheets use the same iterative approach behind their built-in IRR function.
What is a good IRR?
A good IRR is one that comfortably exceeds your cost of capital or the return available on comparable investments of similar risk. There is no universal figure: a stable infrastructure project might target a modest IRR, while a venture capital fund might require thirty percent or more to offset high failure rates. Always judge IRR against the relevant benchmark, not in isolation.
Why might a project have more than one IRR?
When a project's cash flows change sign more than once, for example an outflow, then inflows, then another large outflow, the equation can have multiple mathematical solutions, giving several IRRs. In such cases IRR becomes ambiguous and unreliable as a decision rule. Analysts then prefer net present value or a modified IRR, which resolves the multiple-solution problem.
Should I use IRR or NPV?
Use both where possible. IRR is easy to communicate as a percentage, but NPV is the more reliable rule because it measures absolute value added and avoids IRR's pitfalls with reinvestment assumptions and multiple solutions. When two projects give conflicting rankings, trust NPV, especially if the projects differ in scale or in the timing of their cash flows.