IRR Calculator
Calculate the internal rate of return on a series of cash flows.
| Year | Cash Flow | Present Value (at IRR) |
|---|---|---|
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This calculator finds the internal rate of return for any investment with a series of cash flows:
- Enter your initial investment. This is the upfront cost, the amount you pay at the start. For example, $100,000 for a rental property or a capital project.
- Enter annual cash flows. Fill in the expected cash flow for each year. These can be rental income, business profits, or any periodic returns. Use the "Add Year" button if you need more periods.
- Read your IRR. The result updates instantly. A positive IRR means the investment generates a return. Compare this to your required rate of return or cost of capital to decide if the investment is worthwhile.
Use the Share button to send a pre-filled link with your inputs, or Copy to grab the result. The summary table shows the present value of each cash flow discounted at the calculated IRR.
About Internal Rate of Return
The internal rate of return (IRR) is the discount rate that makes the net present value (NPV) of all cash flows equal to zero. In simpler terms, it is the annualized rate of return an investment is expected to generate based on its cash flow pattern.
IRR is widely used in corporate finance for capital budgeting decisions and in real estate for evaluating rental properties. If a project's IRR exceeds the company's required rate of return (or hurdle rate), the project adds value. If the IRR falls below the hurdle rate, the project destroys value.
This calculator uses the Newton-Raphson numerical method to find the rate where NPV equals zero. All calculations run entirely in your browser. No data is stored or sent to any server.
Frequently Asked Questions
What is IRR?
IRR (Internal Rate of Return) is the annualized discount rate that makes the net present value of a series of cash flows equal to zero. It represents the effective annual return an investment generates over its lifetime, accounting for the timing and size of each cash flow. A higher IRR indicates a more profitable investment.
How is IRR different from ROI?
ROI (Return on Investment) is a simple ratio of total profit to total cost, expressed as a percentage. It ignores the time value of money and the timing of cash flows. IRR accounts for both. For example, earning $50,000 on a $100,000 investment gives a 50% ROI whether it took 2 years or 10 years. IRR would show very different rates for those two scenarios, making it a better tool for comparing investments with different time horizons.
What is a good IRR?
A "good" IRR depends on the context. In corporate finance, any IRR above the company's weighted average cost of capital (WACC) adds value. For private equity, target IRRs typically range from 15% to 25%. For real estate investments, 8% to 12% is often considered solid. The key is comparing your IRR to your opportunity cost: what return could you earn elsewhere at similar risk?
When does IRR not work?
IRR has limitations. When cash flows alternate between positive and negative multiple times, there can be more than one IRR (or none at all). IRR also assumes that intermediate cash flows are reinvested at the IRR itself, which may not be realistic for very high rates. For non-conventional cash flow patterns, modified IRR (MIRR) or NPV analysis is often more reliable.