Compute IRR for a scenario with a fixed recurring cash flow (deposit or withdrawal).
Compute IRR using the initial investment and subsequent annual cash flows. Use negative values for investments and positive values for returns.
| Period | Cash Flow | Present Value | Cumulative CF |
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The Internal Rate of Return (IRR) is the discount rate at which the Net Present Value (NPV) of a project's cash flows equals zero. In other words, it is the "break-even" rate of return for an investment when considering the time value of money.
When analysts evaluate investments, they typically pay an initial cost (outflow) and receive a series of returns (inflows) over time. Because money today is worth more than the same amount of money in the future, future cash flows must be discounted back to their present value. The IRR is the specific discount rate that makes the sum of all discounted cash flows exactly zero.
If the IRR of a project is higher than the company's required rate of return (the hurdle rate) or the cost of capital, the project is generally considered worthwhile. If the IRR is below the required rate, the project may not be viable.
The IRR is the rate r that satisfies the following equation:
Where:
There is no closed-form algebraic solution for r in most real-world cases. Instead, analysts use iterative numerical methods. This calculator uses:
The result is accurate to within 1e-10.
1. Investment decision making
Businesses and investors compare the IRR of a project against their required rate of return (hurdle rate). If IRR > hurdle rate, the project is acceptable.
2. Capital budgeting
Companies rank competing projects by IRR. Projects with higher IRRs are prioritized, subject to capital constraints.
3. Loan and lease analysis
Lenders and lessees use IRR to assess the cost of financing options and lease agreements.
4. Private equity and venture capital
IRR is a standard performance metric for measuring return on investment over time in these asset classes.
5. Real estate investment analysis
Real estate investors use IRR to evaluate property investments by factoring in purchase price, rental income, maintenance costs, and expected sale price.
A manufacturing firm is evaluating the purchase of a machine costing $40,000 upfront. The machine is expected to generate:
Entering these values in the "Irregular Cash Flow" mode returns an IRR of ~19.44%.
If the firm's cost of capital is 12%, this project is appealing (19.44% > 12%). If the hurdle rate were 20%, the project would not meet the requirement.
Two real estate investments both require $100,000 upfront and pay out $150,000 total over 5 years, but with different timing:
Investment A:
Investment B:
Both have a simple ROI of 50%. But:
Investment A has a higher IRR because it returns cash earlier, allowing for reinvestment or reducing the duration of risk.
This calculator supports two modes:
While IRR is powerful, it has important limitations:
IRR and NPV are complementary metrics. NPV tells you the absolute value created (in dollars); IRR tells you the efficiency of the investment (as a percentage). For mutually exclusive projects, NPV is generally the better decision criterion because it accounts for scale. In practice, analysts look at both.
Q: Is this calculator free?
A: Yes, completely free and unlimited.
Q: Does my data leave my device?
A: No. All calculations are performed locally in your browser using JavaScript.
Q: What does a negative IRR mean?
A: A negative IRR means the investment loses money in present-value terms β the total discounted inflows are less than the initial outflow.
Q: What if the calculator says "IRR not found"?
A: This typically happens when all cash flows have the same sign (no sign change), meaning no meaningful IRR exists. Ensure at least one negative (initial investment) and one positive (return) cash flow.
Q: Can IRR be used for loans?
A: Yes. For a loan, the IRR represents the effective cost of borrowing. The cash flows would be: positive (loan received), then negative (repayments).
Q: What is the difference between IRR and MIRR?
A: MIRR (Modified IRR) uses a separate reinvestment rate for interim cash flows, avoiding IRR's unrealistic reinvestment assumption. MIRR is often preferred for projects with non-conventional cash flows.
Q: How does the calculator handle the timing of cash flows?
A: For the fixed cash flow mode, you can choose beginning-of-period or end-of-period timing. For irregular cash flows, all annual cash flows are assumed to occur at the end of each year.