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Internal Rate of Return Calculator

Enter your initial investment and expected equal annual cash flows to find the discount rate at which the investment breaks even (NPV = 0).

How it is calculated

The IRR is the rate r that makes the net present value of the cash flows zero:

0 = −I + CF/(1+r) + CF/(1+r)2 + … + CF/(1+r)n

I is the initial investment in dollars, CF is the same cash flow received at the end of each year, and n is the number of years. There is no closed-form answer, so the engine searches between 0% and 100% by repeated halving until the NPV reaches zero. The number of years is rounded to a whole number (5.5 becomes 6) and must be between 1 and 100. A result appears only when total cash returned exceeds the investment and the IRR is below 100%; otherwise nothing is shown. The extra figure "NPV check" is the same cash flows discounted at a fixed 10%.

Worked example

You invest $100,000 and receive $25,000 at the end of each of 6 years. Total cash returned is 25,000 × 6 = $150,000.00, so the project does return more than it costs. The search then looks for the rate where the six discounted payments add up to exactly $100,000, which is 12.98%. As a cross-check at a 10% discount rate, the payments are worth more than the outlay, giving an NPV of $8,881.52. A positive NPV at 10% is consistent with an IRR above 10%.

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Common mistakes

  • Entering the total of all cash flows in the annual field. The field expects the amount received in one year; the tool multiplies it by the years itself.
  • Expecting a negative IRR for a losing investment. If the cash returned does not exceed the amount invested, the tool shows no result rather than a negative rate.
  • Expecting a result for a very quick payoff. An IRR of 100% or more, such as $300,000 back after one year on $100,000, is outside the search range and gives no result.
  • Using the tool for uneven cash flows. Every year is assumed to pay the same amount, so a project with a large sale in the last year will be misrepresented.
  • Reading the "NPV check" as part of the IRR. It is evaluated at a fixed 10%, not at your own cost of capital.

Sources

About this calculator

The Internal Rate of Return (IRR) is the discount rate at which an investment's Net Present Value (NPV) equals exactly zero — in other words, the annualized return the investment actually delivers once every future cash flow is discounted back to today. It is one of the most widely used metrics in corporate finance and investment analysis because it expresses profitability as a single percentage that can be compared directly against a hurdle rate or the cost of capital.

Financial analysts, private equity firms, and real estate investors use IRR to decide whether a project or deal clears the minimum acceptable return, and to rank competing investment opportunities with different cash flow timing. Because IRR assumes cash flows are reinvested at the IRR itself, it is often reported alongside NPV at a fixed discount rate — commonly the investor's cost of capital — as a sanity check.

This calculator finds the IRR for an investment with a uniform initial outlay and equal annual cash flows, and also reports total cash returned and the NPV at a 10% discount rate, giving you two complementary views of the same investment.

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