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Internal Rate of Return (IRR) Calculator

Estimate IRR from an investment and up to five annual cash flows.

Results

Internal rate of return
2.48%

How to use this calculator

  1. Enter the initial investment (negative cash flow) and up to five yearly cash flows.
  2. We iterate to find the discount rate (IRR) where NPV = 0.
  3. Review the IRR result to compare against your hurdle rate.

Inputs explained

Initial investment
Upfront cash outlay (modeled as negative).
Year 1–5 cash flows
Net cash flows each year; can be positive or negative.

How it works

IRR is the discount rate that sets net present value (NPV) of all cash flows to zero.

We solve for the rate using a bracketed search so you can see the implied annual return.

Formula

NPV = Σ (Cash flowₜ / (1 + IRR)^t) − Initial investment = 0

When to use it

  • Comparing projects or properties with uneven cash flows.
  • Testing if a deal clears your IRR hurdle before deeper modeling.
  • Running sensitivity by adjusting yearly cash flows.

Tips & cautions

  • IRR assumes reinvestment at the IRR rate; pair with NPV to see dollar value at a chosen discount rate.
  • Unusual cash flow patterns can produce multiple IRRs; this tool returns one solution.
  • Include all expected inflows and outflows for realistic results.
  • Single-solution IRR; certain cash flow patterns can have multiple valid IRRs or none.
  • Does not include taxes, financing structure, or discount rate comparisons like NPV.

Worked examples

$100k initial, $35k for 3 years

  • IRR ≈ 9.7%

$50k initial, $20k/year for 4 years

  • IRR ≈ 15.8%

Deep dive

This IRR calculator finds the rate that sets NPV of your cash flows to zero. Enter an upfront investment and yearly cash flows to see the implied internal rate of return.

Use it to vet projects with uneven cash flows and compare against your hurdle; pair with NPV for dollar-value decisions at a chosen discount rate.

FAQs

What if IRR doesn't converge?
If all cash flows are positive, IRR is undefined. Mix of positive and negative flows is needed.
Is IRR the same as CAGR?
No. CAGR assumes a single inflow and outflow. IRR handles uneven cash flows over time.

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