IRR Calculator
Find the rate of return that makes net present value zero
Enter what goes out and what comes back
Free, no sign-up. It starts filled in with a worked example so you can see a complete answer straight away, and every number below updates as you type.
The money that leaves your pocket today, before any of it comes back. A positive number, for example 10000. Any currency works: use the same one in every field.
Enter the money in or out for each year
Money coming to you is a positive number, for example 3000. Money you pay out that year is negative, for example -2000. An empty year counts as zero and every later year stays where it is.
The least you would accept for putting your money into this project. Type 10 for 10% a year. Leave it empty if you have no target in mind.
This earns 25.75% a year, more than the 10% you require
You pay 10,000 today and get 20,000 back over 5 years. Allowing for the wait, since money that arrives later is worth less than money today, that is the same as earning 25.75% a year on your money. At the 10% a year you require, the yearly amounts are worth 14,803 today, 4,803 more than you pay.
The numbers behind that
What you pay at the start
The money that leaves your pocket today, in year 0.
10,000
What comes back, added up
Every yearly amount added together, over 5 years. That is 10,000 more than you pay, before allowing for the wait.
20,000
Yearly return on your money
The internal rate of return (IRR). 10,000 in an account earning 25.75% a year would pay out exactly the yearly amounts you entered and finish at zero.
25.75%
Worth today at 10% a year
What the yearly amounts are worth in today's money if you insist on 10% a year. That is 4,803 more than the 10,000 you pay: the value the project adds (its net present value).
14,803
How much room you have
Click an option to jump to the field you would change.
- Every yearly amount could come in up to 32.4% lower than planned and you would still earn at least 10% a year.
Each yearly amount is counted as arriving at the end of its year.
Year 1 means twelve months after you pay, year 2 twenty-four months, and so on. If your money arrives monthly or on uneven dates, the true figure will differ a little. The rate also assumes that each amount you receive can be put back to work at that same rate, which flatters a high figure. And it says nothing about size: 40% a year on a small project can be worth far less in money than 12% on a large one.
What happens if the money coming back is not what you planned
The yearly amounts are forecasts, and the answer moves with them. Here is the same project with every yearly amount scaled up or down, so you can see how much of the return depends on the payments arriving in full.
| If every year comes in | Rate of return | Today's value minus what you pay |
|---|---|---|
| 20% lower than planned | 16.36% | 1,843 |
| 10% lower than planned | 21.17% | 3,323 |
| exactly as planned (yours) | 25.75% | 4,803 |
| 10% higher than planned | 30.16% | 6,284 |
| 20% higher than planned | 34.42% | 7,764 |
Each year's amount is brought back into today's money at the rate found above. Added together they come to what you paid at the start, and that is exactly what the internal rate of return means.
| Year | Amount that year | Worth today at that rate |
|---|---|---|
| Start (year 0) | -10,000 | -10,000 |
| Year 1 | 3,000 | 2,386 |
| Year 2 | 3,500 | 2,213 |
| Year 3 | 4,000 | 2,011 |
| Year 4 | 4,500 | 1,800 |
| Year 5 | 5,000 | 1,590 |
| Everything coming back, in today's money | 10,000 | |
The internal rate of return is the discount rate that makes the net present value of a project's cash flows equal to zero. It expresses an investment's expected return as a single annualized percentage, which makes it easy to compare against a required hurdle rate or cost of capital.
0 = −C₀ + Σ CFₜ / (1 + IRR)^t
Step 1: Enter what you pay at the start as a positive number. The calculator already treats it as money going out on day one.
Step 2: Fill in each year from your own point of view: money you receive is positive, money you pay out is negative. Use "Add a year" and the minus button so the number of rows matches the length of the project.
Step 3: Enter the yearly return you require. The calculator compares its answer with that figure and also shows what the payments are worth today at that rate.
Step 4: Read the answer straight away, there is nothing to press. The table under it shows how much the answer depends on the amounts arriving in full. Below that table, click "Where the answer comes from, year by year" to open the year by year figures.
What Is the Internal Rate of Return?
The internal rate of return is the annualized discount rate that makes the net present value of an investment's cash flows equal to zero. It is called "internal" because it depends only on the investment's own cash flows, the upfront cost and the inflows it produces, and not on any external benchmark rate. Intuitively, the IRR is the effective compounded return the investment is expected to earn over its life.
Investors and managers use IRR to screen capital projects, compare investment opportunities, and decide whether an expected return justifies the risk. The common decision rule is to accept a project when its IRR exceeds the required rate of return, also called the hurdle rate or cost of capital, and to reject it when the IRR falls short.
IRR and NPV: Two Sides of the Same Equation
0 = −C₀ + Σ CFₜ / (1 + IRR)^t
IRR and net present value are directly linked. Net present value measures the money an investment creates at a discount rate you choose; the IRR is the specific discount rate at which that figure becomes exactly zero. For most cash flow patterns there is no algebraic formula for it, so it has to be found by searching. This calculator walks the whole range from -99.99% to +1,000% a year, a tenth of a percentage point at a time up to +200% and a full point above that, notes every place where the net present value crosses zero, and narrows in on each of those crossings by repeatedly halving the interval around it. Because it looks at the whole range rather than only at the two ends, it finds every rate that solves the project, not just the first one.
When IRR and NPV disagree about which of two projects is better, which can happen when projects differ in scale or in the timing of their cash flows, corporate finance theory generally favors the NPV rule, because NPV measures the absolute amount of value created, while IRR is a rate that can be biased toward smaller projects that return capital quickly. A useful habit is to read IRR and NPV together: use IRR for an intuitive return percentage and NPV, in money, as the tie-breaker.
Reinvestment, Multiple IRRs, and Other Caveats
Standard IRR carries an implicit reinvestment-rate assumption: it assumes every interim cash inflow can be reinvested at the IRR itself until the end of the project. When the IRR is high, that assumption is often unrealistic, and the headline figure can overstate the return you will actually realize. The modified internal rate of return (MIRR) addresses this by letting you specify a separate, more conservative reinvestment rate for interim cash flows.
A second caveat applies when the money changes direction more than once, for example a cost at the start, then inflows, then a large payment out at the end for decommissioning or cleanup. The equation can then have several rates that all solve it, and none of them is more correct than the others. This calculator does not hide that: when it finds more than one rate it lists them all and says the internal rate of return cannot settle the decision on its own. It is equally direct in the other awkward cases, telling you when no rate at all makes the numbers balance, when the return is above the top of the range it searches, and when a year has been left empty and counted as zero. Whenever the rate cannot decide, the net present value at the return you require can, which is why the tool shows it beside the rate.
Related Valuation Tools
IRR is one piece of a complete valuation toolkit. To see the value in money an investment creates at a fixed discount rate, use our NPV Calculator and to discount a single future amount back to today, the Present Value Calculator. When you need a defensible discount rate to compare your IRR against, our WACC Calculator estimates the weighted average cost of capital, a common hurdle rate for capital-budgeting decisions.
Frequently Asked Questions About the IRR Calculator
The internal rate of return is the discount rate at which the net present value (NPV) of all an investment's cash flows equals zero. In plain terms, it is the annualized effective return the investment is expected to earn. A higher IRR generally indicates a more attractive investment, provided the cash flow assumptions are realistic.
NPV gives an amount of money, the value created at a discount rate you choose, while IRR is a single percentage rate that makes NPV equal to zero. They are closely linked: IRR is the break-even discount rate for NPV. When comparing mutually exclusive projects of different sizes or timing, NPV is generally the more reliable decision rule because IRR can favor smaller, faster-returning projects.
Standard IRR quietly assumes every amount you receive along the way can be reinvested at the IRR itself, which flatters the figure when the rate is high. And yes, there can be more than one. When the money changes direction more than once, for example an outflow at the start, money coming in, then a large payment out at the end, the equation can have several rates that all solve it. This calculator searches from -99.99% to +1,000% a year, lists every rate it finds rather than picking one, and tells you plainly when it finds more than one or none at all. In those cases read the net present value at your required return instead, or use the modified internal rate of return (MIRR).
The year stays in place and counts as zero, which is what a year with no money moving actually is, and the calculator says so under the answer. This matters more than it sounds: if an empty year were simply dropped, every later amount would be treated as arriving a year earlier than it does, and the return would come out too high. If a year is genuinely not part of the project, remove the row instead of clearing it.
Yes. The amount you pay at the start goes in the first field as a positive number and is treated as money leaving your pocket today. After that, every year is entered from your point of view: money you receive is positive, money you pay out is negative, so a year with a 2,000 repair bill is entered as -2000. If an answer comes out looking strange, check the signs first.
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Educational use only. This tool provides estimates for informational purposes and does not constitute financial, investment, tax, or legal advice. Results are based on inputs you provide and mathematical models, they do not guarantee future performance. Always consult a qualified financial adviser before making investment decisions.