This IRR calculator finds the internal rate of return of an investment — the discount rate at which its net present value is exactly zero — solved numerically from your actual cash flow series.
IRR: the Rate the Investment "Earns"
IRR is defined implicitly — it's the r solving Σ CFₜ ÷ (1 + r)ᵗ = initial cost — so every IRR tool, this one included, hunts it numerically (here: a fine scan plus bisection refinement). Interpretation: the project's own break-even cost of capital. Above your hurdle rate, accept; below, decline — the exact mirror of the NPV Calculator's verdict at that rate. Part of our Finance Calculators collection.
Worked Examples (Verified)
- Invest $1,000, receive $1,331 at year 3 (defaults): 1,331 = 1,000 × 1.1³ → IRR = 10.00% exactly — the cube of 1.1 doing the verification for you
- The NPV page's project (−10,000; then 3,000/4,000/5,000/6,000): IRR ≈ 24.9% — consistent with its NPV staying positive until the discount rate reaches the mid-twenties
- Multiple-IRR trap: flows −100, +230, −132 (invest, big return, cleanup cost) produce IRRs of 10% and 20% — enter it (initial 100, flows "230, -132") and watch this calculator refuse to pick one, honestly
IRR's Known Pathologies
- Multiple roots: each sign change in the flow series can add an IRR (Descartes' rule) — non-conventional projects (mining, nuclear, anything with end-of-life costs) are the natural habitat.
- Reinvestment assumption: IRR implicitly reinvests interim flows at the IRR — flattering for 40% projects; MIRR exists to patch this.
- Scale blindness: 100% on $1,000 vs 15% on $10M — IRR ranks the first, NPV the second, and only one of those pays for a building.
- No IRR at all when flows never change the NPV sign — a result this calculator states rather than faking.
Related Tools
- NPV Calculator — value at your chosen rate
- Payback Period Calculator — the liquidity view
- Finance Calculators — the full collection
Frequently Asked Questions
How is IRR calculated?
By solving NPV = 0 for the rate — there's no closed-form formula beyond two periods, so calculators iterate. This one scans rates from −99% to 1000% for NPV sign changes, then bisects each bracket to precision. Verify any result by feeding the rate into an NPV calculation: it should return ≈ $0.
What is a good IRR?
Above your hurdle rate (cost of capital / required return) is the entire test — context supplies the number: ~8–10% hurdles for stable corporate projects, 15–25%+ for risky ventures, while real estate investors often target 12–18%. An IRR below your mortgage rate is a project paying you less than your bank charges you.
Why can there be two IRRs?
Because NPV as a function of r is a polynomial in disguise — every sign change in the cash flow sequence permits another crossing. Flows −100, +230, −132 cross zero at both 10% and 20%. When that happens IRR stops being a decision rule; NPV at your actual rate takes over.
IRR vs CAGR — same thing?
Cousins: CAGR is the IRR of a two-flow investment (one out, one in, nothing between). Add interim flows and only IRR generalizes. A stock bought once and sold once has IRR = CAGR; a rental property with annual rents needs IRR.
Does IRR assume reinvestment?
Mathematically, ranking by IRR treats interim cash as if reinvested at the IRR itself — the standard critique, addressed by MIRR's explicit reinvestment rate. For accept/reject against a hurdle at reasonable rates, the distortion rarely flips the verdict; for ranking giant-IRR projects, beware.
Is this IRR calculator free?
Yes — free, instant, no sign-up.