Internal Rate of Return (IRR) Calculator
Find the annualized return that makes a project's net present value zero, assuming equal annual cash flows. Use it to judge whether an investment clears your required rate of return.
Last updated: May 2026
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About this calculator
The internal rate of return (IRR) is the discount rate r at which a project's net present value equals zero: 0 = -C0 + Σ CFt / (1 + r)^t, summed over each year t from 1 to n. Here C0 is the Initial Investment, CF is the equal Annual Cash Flow, and n is the Number of Years. Because that equation has no closed-form solution, the calculator finds r numerically by bisection, narrowing the rate until NPV is essentially zero. The IRR is the project's intrinsic compound annual growth rate of invested capital: if the IRR exceeds your required return (the hurdle rate or cost of capital), the project adds value; if it falls short, it destroys value. Edge cases matter. If total undiscounted cash flows are less than the initial outlay, the IRR is negative. If cash flows never recover the investment at any rate, no real IRR exists and the result is unreliable. This tool assumes a single up-front outlay followed by equal yearly inflows; uneven cash flows, or flows that change sign more than once, can produce multiple IRRs and need a full cash-flow IRR model. IRR also implicitly assumes interim cash flows are reinvested at the IRR itself, which can overstate returns.
How to use
Example 1 — a $10,000 project paying $3,000 per year for 5 years. Enter Initial Investment = 10000, Annual Cash Flow = 3000, Number of Years = 5. The calculator solves -10000 + 3000/(1+r) + … + 3000/(1+r)^5 = 0, giving IRR ≈ 15.24%. Verify the ballpark: total cash back is $15,000 on $10,000, so a mid-teens annual return is sensible. Since 15.24% likely beats a typical 8–10% hurdle rate, the project looks worthwhile. Example 2 — a $20,000 project paying $4,000 per year for 6 years. Enter 20000, 4000, 6. The IRR solves to about 5.47%. Verify: $24,000 returned on $20,000 over six years is only a small gain, so a low single-digit IRR is expected. If your cost of capital is 8%, this project's 5.47% IRR means it would erode value despite returning more cash than was invested.
Frequently asked questions
What is a good IRR for an investment?
A 'good' IRR is any rate that comfortably exceeds your hurdle rate — the minimum return you require, usually your cost of capital or the return on a comparable alternative. For corporate projects that hurdle is often 8–12%; for higher-risk ventures investors may demand 20% or more. IRR is only meaningful in comparison: a 15% IRR is excellent against an 8% hurdle but poor against a 25% one. Never read the number in isolation — always pair it with the required return and the project's risk. Two projects can share an IRR yet differ wildly in scale and risk.
What is the difference between IRR and NPV?
NPV tells you how much value (in dollars) a project adds at a specific discount rate, while IRR tells you the single rate at which that NPV would be zero. They usually agree on accept/reject decisions for a standalone project, but they can disagree when ranking mutually exclusive projects of different sizes or cash-flow timing. NPV is generally the more reliable decision tool because it measures absolute value created and assumes reinvestment at the discount rate rather than at the IRR. A common mistake is choosing the higher-IRR project when the lower-IRR one actually has a larger NPV. Use IRR for an intuitive 'rate' and NPV for the final call.
Why can a project have more than one IRR?
IRR is a root of a polynomial in (1 + r), and by Descartes' rule of signs the number of possible real roots equals the number of sign changes in the cash-flow stream. A conventional project — one outflow followed by inflows — has a single sign change and one IRR. But projects with later outflows (cleanup costs, reinvestment) can switch sign multiple times and yield two or more mathematically valid IRRs, none of which is clearly 'the' return. This calculator assumes the conventional one-sign-change pattern. For non-conventional cash flows, use NPV or the modified IRR (MIRR) instead.
When should I NOT use this IRR calculator?
Avoid it whenever your cash flows are not equal each year — this tool assumes a constant annual inflow, so uneven streams need a full year-by-year IRR function. Do not use it for projects with cash flows that change sign more than once, because multiple IRRs make the single answer meaningless. It is also the wrong tool when comparing projects of very different sizes, where NPV gives a sounder ranking. Finally, treat the result cautiously for very long horizons, since IRR assumes every interim cash flow is reinvested at the IRR itself, which often overstates the real outcome. In those cases MIRR, which lets you set a realistic reinvestment rate, is more honest.
Does IRR account for inflation or taxes?
No — IRR is a nominal, pre-tax measure based purely on the cash flows you enter. If your cash flows are stated in nominal dollars, the resulting IRR is a nominal rate that includes expected inflation, and you should compare it to a nominal hurdle rate. To get a real (inflation-adjusted) IRR, either enter inflation-adjusted cash flows or subtract expected inflation from the nominal result using the Fisher relation. Taxes are handled the same way: feed in after-tax cash flows if you want an after-tax IRR. The calculator simply solves the math — the economic assumptions live entirely in the numbers you provide.