IRR Calculator
Calculate the internal rate of return for a series of cash flows. Free IRR calculator that finds the rate where NPV equals zero.
About the IRR Calculator
The internal rate of return (IRR) is the single discount rate at which a project's net present value is exactly zero — effectively the annualised return the investment delivers. This free IRR calculator takes your initial investment and a series of cash flows and solves for that rate, so you can judge a project against your required return.
There is no formula that isolates IRR, so the calculator finds it numerically: it tries different rates until the discounted cash flows just cover the initial outlay. If the IRR exceeds your cost of capital, the project adds value; if it falls short, it does not. IRR lets you compare projects on a percentage basis.
Investors, business owners and finance students use IRR to appraise and rank investments. It works alongside NPV, which measures value in currency terms. Everything computes in your browser with no signup.
How to Use the IRR Calculator
- 1Enter the initial investment as a negative cash flow at time 0.
- 2Enter the cash flow expected in each subsequent period.
- 3Read the internal rate of return.
- 4Compare the IRR with your required return to accept or reject the project.
Frequently Asked Questions
What is the internal rate of return?
IRR is the discount rate that makes a project's NPV zero — the effective annual return it earns. Investing 100,000 and receiving 40,000, 50,000 and 60,000 over three years gives an IRR of about 20.6%, meaning the project effectively returns 20.6% per year.
How do I use IRR to make a decision?
Compare it with your cost of capital or required return. If the IRR is higher, the project earns more than your benchmark and adds value; if lower, reject it. For a required return of 10%, a project with a 20.6% IRR is clearly worth pursuing.
What is the difference between IRR and NPV?
NPV gives a value in currency at a chosen discount rate; IRR gives a single percentage rate independent of any rate you pick. NPV is generally preferred for choosing between projects, because IRR can mislead when cash flows change sign more than once or projects differ in scale.
Can a set of cash flows have more than one IRR?
Yes. When cash flows switch between negative and positive multiple times, the equation can have several roots, giving multiple IRRs. In those cases NPV is the more reliable measure. For a normal project — one outflow followed by inflows — the IRR is unique.