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. Enter it as a positive number, for example 10000.
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.
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$
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$
The least you would accept for taking this on, written as a whole number, for example 10 for 10% a year. Leave it empty if you have no target in mind.
IRR Calculator Results
Internal Rate of Return
25.75%
a year, over the whole life of the project
Paid at the start
$10,000.00
Coming back in total
$20,000.00
Difference, before discounting
$10,000.00
Worth today at 10.00%
$4,803.26
In plain terms: you pay $10,000.00 today and get $20,000.00 back over the next 5 years. Spread across that time, and counting the fact that money arriving later is worth less than money arriving now, that works out at 25.75% a year. Put another way, $10,000.00 growing at 25.75% a year would produce exactly the payments you entered and finish with nothing left over.
Judged the other way round: if you insist on 10.00% a year, the payments are worth $4,803.26 more today than the $10,000.00 they cost you. That is the value the project adds on top of the return you demanded.
Where the answer comes from, year by year
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) | -$10,000.00 | -$10,000.00 |
| Year 1 | $3,000.00 | $2,385.66 |
| Year 2 | $3,500.00 | $2,213.30 |
| Year 3 | $4,000.00 | $2,011.50 |
| Year 4 | $4,500.00 | $1,799.53 |
| Year 5 | $5,000.00 | $1,590.02 |
| Everything coming back, in today's money | $10,000.00 | |
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 | Worth today at 10.00% |
|---|---|---|
| 20% lower than planned | 16.36% | $1,842.61 |
| 10% lower than planned | 21.17% | $3,322.93 |
| exactly as planned | 25.75% | $4,803.26 |
| 10% higher than planned | 30.16% | $6,283.59 |
| 20% higher than planned | 34.42% | $7,763.91 |
Insight: A rate of return is only as good as the payments behind it, and it says nothing about size: 40% a year on a small project can be worth far less in cash than 12% on a large one. Read this figure next to the value in dollars at the return you require, and treat a very high rate as a prompt to check the forecast rather than as good news.
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 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. Check the year by year table to see where it comes from, and the table below it to see how much the answer depends on the payments arriving in full.
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 dollars 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 dollar value 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 a dollar amount of value created at a specific 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. Getting a sign wrong is the most common reason an IRR answer comes out looking strange.
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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.