IRR Calculator

Modify the values and click calculate

Cash Flows

Initial Investment ($)

Enter as a positive number -- this is cash going out.

Year 1 Cash Flow ($)

Year 2 Cash Flow ($)

Year 3 Cash Flow ($)

Year 4 Cash Flow ($)

Year 5 Cash Flow ($) (optional)

Cash flows can be positive (inflows) or negative (further outflows). Leave trailing years blank if your project is shorter than 5 years.

Internal Rate of Return

Enter your initial investment and periodic cash flows to calculate the IRR.

Validation Error

Enter an initial investment greater than zero.

Understanding the Internal Rate of Return

The internal rate of return (IRR) is the discount rate at which a series of cash flows -- an initial outlay followed by later returns -- has a net present value (NPV) of exactly zero. In plain terms, it's the annualized return a project or investment actually delivers, accounting for the size and timing of every cash flow, not just the total.

IRR Is Where NPV Crosses Zero

At the IRR, discounting every cash flow back to today at that exact rate produces a net present value of zero -- the future cash flows are worth exactly as much as the initial outlay, no more and no less.

Why Bisection, Not a Formula

There's no closed-form algebraic formula for IRR with more than two cash flows. This calculator finds it numerically by bisection: repeatedly narrowing a search range until the NPV at the midpoint rate is close enough to zero.

When There's No Solution

If every cash flow has the same sign (e.g. all inflows, no outflow, or vice versa), there's no discount rate that zeroes out the NPV -- this calculator flags that case explicitly instead of returning a nonsensical number.

IRR vs. a Fixed Comparison Rate

Alongside the IRR, this calculator shows the plain NPV of your cash flows discounted at a fixed 8% rate -- a quick secondary check for whether your project clears a typical hurdle rate, independent of solving for IRR itself.

Worked Example

Suppose you invest $10,000 today and receive $3,000, $3,500, $4,000, and $4,000 back over the next four years:

Cash flow series: -$10,000, $3,000, $3,500, $4,000, $4,000.
IRR: approximately 15.81%.
NPV at an 8% comparison rate: approximately $1,893.91 -- positive, meaning the project clears an 8% hurdle rate comfortably.

IRR vs. Comparison Rate

IRR: 15.81%
NPV at 8%: $1,893.91

Using IRR to Compare Projects

A common rule of thumb: if a project's IRR exceeds your required rate of return (your "hurdle rate," often your cost of capital), it's generally worth pursuing on a return basis. IRR is especially useful for comparing projects of similar scale and duration -- for projects of very different sizes or lengths, also check the plain NPV, since a smaller project can have a higher IRR while creating less total value.

Key Takeaways

IRR Is the Break-Even Discount Rate: It's the rate at which the present value of future cash flows exactly equals your initial investment.
Compare IRR to Your Hurdle Rate: An IRR above your required return suggests the investment is worthwhile on a return basis.
Not Every Series Has an IRR: Cash flows that never change sign have no solution -- this calculator flags that case instead of guessing.
Pair With NPV for Full Context: IRR tells you the rate of return; NPV (shown here at 8%) tells you the dollar value created -- use both together.