IRR Calculator (Internal Rate of Return)
IRR is the annualized return an investment's actual cash flows earn — the discount rate at which NPV hits exactly zero. Enter the investment and yearly flows; the solver finds the rate.
How to use this calculator
- Enter the upfront investment.
- List each year's cash flow in order — include any final sale value in the last year.
- Press Solve. Compare the IRR against your hurdle rate to accept or reject.
Formula used
There's no closed-form solution — the calculator solves numerically (bisection). IRR assumes interim cash flows are reinvested at the IRR itself, an optimistic assumption for very high IRRs; MIRR addresses that refinement.
Example calculation
Invest 1,000,000, receive 300k / 400k / 400k / 350k: the solver finds IRR ≈ 16.27%.
Cross-check: NPV at 10% was +142,886 (positive), and at 16.27% it's essentially zero — the definition in action. Against a 12% hurdle rate, the project passes.
What IRR is really saying
IRR converts a messy cash-flow schedule into one comparable number: the effective compound annual return those exact flows deliver. That's why private equity, real estate and project finance speak fluent IRR — it lets a 3-year flip and a 10-year build compete on one axis.
Its quirks deserve respect: unconventional flows (sign changes) can produce multiple IRRs; ranking projects purely by IRR can favor small-fast over large-valuable (NPV catches this); and the built-in reinvestment assumption flatters very high IRRs. Used as an accept/reject test against a hurdle rate — its intended job — it's excellent.
Why use this calculator?
- Compare investments with different sizes and timelines on annualized return.
- Verify claimed returns on deals — plug the actual promised flows in.
- Cross-check against NPV at your hurdle rate, shown alongside.
Frequently asked questions
What is a good IRR?
Above your alternatives: public equity has returned ~10% historically, so private deals typically demand 15–25%+ to compensate for risk and illiquidity. An IRR below your hurdle rate is a rejection regardless of how positive it sounds.
IRR vs CAGR — what's the difference?
CAGR handles one starting value and one ending value; IRR generalizes it to any pattern of interim flows. With a single inflow at the end, IRR and CAGR are identical.
Why does my spreadsheet's IRR differ slightly?
Timing conventions: this calculator assumes end-of-year flows, like Excel's IRR. XIRR uses exact dates and will differ when flows arrive mid-year. Large gaps usually mean a data-entry difference, not a math one.