IRR Calculator

Calculate internal rate of return from an investment's cash flows

About IRR Calculator

IRR (Internal Rate of Return) is the discount rate at which an investment's NPV equals exactly zero — in other words, the annualized rate of return the investment is expected to generate. It's used alongside NPV to evaluate whether a project's expected return clears a company's cost of capital or an investor's required return.

Formula

IRR is the rate r that solves: 0 = −Initial Investment + Σ [Cash Flow_t / (1 + r)^t]

How It Works

Enter your initial investment and expected cash flow for each future year
Since there's no direct algebraic formula for IRR with multiple cash flows, the calculator solves for it numerically — testing rates until it finds the one where NPV equals zero
Optionally enter a hurdle rate (often your WACC) to see whether the IRR clears your required return
The chart shows how NPV falls as the discount rate rises — IRR is exactly where that line crosses zero

Examples

Calculation	Expression	Result
$100k investment	3 years of $40k cash flows	IRR ≈ 9.7%
$50k investment	$20k/yr for 4 years	IRR ≈ 21.9%

Tips

Accept a project when IRR is greater than your cost of capital (WACC) or required rate of return; reject it when IRR falls short
IRR requires at least one negative cash flow (the initial investment) and at least one positive cash flow — an all-positive or all-negative cash flow series has no IRR
For cash flows that switch sign more than once (invest, profit, then a large future cost), there can be multiple valid IRRs — NPV is usually the more reliable metric in that case

Frequently Asked Questions

What is a good IRR?

There's no universal 'good' number — a good IRR is simply one that exceeds your cost of capital (WACC) or required rate of return for that level of risk. A 15% IRR might be excellent for a low-risk project but underwhelming for a high-risk venture investment.

Why can't IRR be solved with a simple formula?

With more than one future cash flow, the IRR equation becomes a higher-degree polynomial with no general algebraic solution — it has to be solved numerically, by testing rates until the one that makes NPV exactly zero is found.

Can an investment have more than one IRR?

Yes — if the cash flows change sign more than once (for example, an initial cost, followed by profits, followed by another large cost), the NPV-vs-rate curve can cross zero more than once, producing multiple mathematically valid IRRs. NPV is generally more reliable for these non-conventional cash flow patterns.

Should I always choose the investment with the highest IRR?

Not necessarily — IRR is a percentage and doesn't account for the scale of the investment. A small project with a very high IRR might create far less total value than a large project with a moderate IRR. NPV is usually a better metric for comparing investments of different sizes.

What's the difference between IRR and a hurdle rate?

IRR is the rate of return an investment is actually expected to generate. A hurdle rate is the minimum acceptable return a company or investor requires (often set equal to WACC) — a project clears the bar when its IRR exceeds the hurdle rate.