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IRR Calculator
Use this free IRR calculator to find the internal rate of return of an investment from its cash flows. Enter your initial investment and the cash you expect each year, and it solves for the rate that makes the net present value zero — then shows the NPV at that rate and a chart of NPV against the discount rate.
Cash flows are the money received at the end of each year. Enter a negative number for a year where you pay in extra money. Leave the optional years blank to ignore them.
| Initial investment | −$10,000.00 |
| Total cash received | $16,000.00 |
| Total profit | $6,000.00 |
| NPV at 10% discount rate | $1,897.59 |
| NPV at the IRR | $0.00 |
NPV vs discount rate
As the discount rate rises, future cash flows are worth less today, so NPV falls. The IRR is the rate where the curve crosses zero.
NPV at different rates
The live chart plots NPV from a −10% to a 40% discount rate for your cash flows.
How it works
The internal rate of return answers one question: what annual rate of return would make this investment exactly break even? Start with the net present value, or NPV. NPV takes every future cash flow, discounts it back to today at some rate, and subtracts the initial cost. A dollar received next year is worth less than a dollar today, because you could have invested today's dollar and earned interest on it — so each future cash flow is divided by (1 + rate) raised to the power of its year. Add up all the discounted flows, subtract the initial investment, and you have the NPV at that rate.
The IRR is the one rate where NPV equals zero. At a low discount rate, future cash flows are worth a lot, so NPV is positive and the investment looks good. At a high discount rate, those same flows are worth little, so NPV turns negative. Somewhere in between, NPV crosses zero — and that crossing point is the IRR. There is no simple formula that gives the IRR directly, so this calculator finds it by bisection: it tries the middle of a wide range, checks whether NPV is positive or negative, and keeps halving the range until the rate is pinned down to a tiny fraction of a percent.
Entering the cash flows is straightforward. The initial investment is the money you put in at the start, entered as a positive number — the calculator treats it as an outflow. Each yearly flow is the cash you expect to receive at the end of that year: rent, profit distributions, the sale price in the final year, or a mix of them. A year where you have to pay in extra money — a big repair, for instance — goes in as a negative number. Years 6 to 8 are optional, so a five-year project and an eight-year project both work in the same tool.
Two cautions are worth knowing. First, IRR assumes that every cash flow you receive is reinvested at the IRR itself, which is optimistic when the IRR is very high. Second, IRR is a rate, not a dollar amount. A small project can have a higher IRR than a big one while adding far less money in total, which is why the calculator also shows the total profit and the NPV at a 10% discount rate. Compare projects by NPV when they are different sizes, and by IRR when you want to know which one earns more per dollar.
IRR is the rate r where NPV = 0
The chart plots NPV against the discount rate from −10% to 40%. You can see the curve start high on the left, fall steadily, and cross the zero line at the IRR. If the curve never crosses zero in that range — for example, when the cash flows never repay the investment — the calculator tells you plainly instead of inventing a number.
Worked example
Suppose you invest $10,000 in a small rental setup and expect to receive $2,000 in year 1, $3,000 in year 2, $4,000 in year 3, $4,000 in year 4, and $3,000 in year 5. Enter those six numbers and the calculator works like this.
Step 1: Add up the cash received: $2,000 + $3,000 + $4,000 + $4,000 + $3,000 = $16,000, so the total profit is $16,000 − $10,000 = $6,000.
Step 2: Check NPV at 10%: $2,000/1.10 + $3,000/1.21 + $4,000/1.331 + $4,000/1.4641 + $3,000/1.6105 − $10,000 = $1,897.59. Positive, so the true IRR is above 10%.
Step 3: Check NPV at 17%: the same flows discounted at 17% give an NPV of about −$98.66. Negative, so the IRR is below 17%.
Step 4: Narrow the range by bisection until NPV is zero. The crossing point is 16.60%.
The tool shows the same result: an IRR of 16.60%, with NPV at the IRR of $0.00. That beats a 10% required return comfortably, so on return alone the project clears the bar — though you would still want to check the risk and whether the yearly cash flows are realistic.
FAQ
What is the internal rate of return (IRR)?
The internal rate of return is the discount rate that makes the net present value of an investment's cash flows exactly zero. In plain terms, it is the annual growth rate the investment would need to earn to justify its price. A project with a higher IRR is generally more attractive, because it earns more per dollar invested per year.
What is a good IRR for an investment?
It depends on the risk. A safe bond might pay 4 to 5 percent, a diversified stock portfolio has historically returned around 7 to 10 percent a year, and a small business or startup project is often expected to return 15 percent or more to justify its risk. The real test is whether the IRR beats your required rate of return — the minimum return you would accept for that level of risk.
How do I enter cash flows in this IRR calculator?
Enter the initial investment as a positive number — the calculator treats it as money going out. Then enter the cash you expect to receive at the end of each year, one value per year. Money coming in is positive; a year where you pay in extra money can be entered as a negative number. The calculator then finds the rate that makes the present value of all those flows equal to zero.
What is the difference between IRR and NPV?
NPV, or net present value, is a dollar amount: the value of all future cash flows discounted at a chosen rate, minus the initial cost. IRR is a percentage: the single discount rate that makes NPV zero. NPV tells you how much value a project adds in dollars, while IRR tells you its percentage return. Use NPV to compare projects of different sizes and IRR to compare their efficiency.
Can an investment have more than one IRR?
Yes, when the cash flows change sign more than once — for example, an investment that needs a large extra payment in a later year. Each sign change can create another rate where NPV is zero. This calculator finds one IRR by searching between -99% and 1,000%, and it shows the NPV at that rate so you can confirm it is near zero. For projects with unusual cash flows, check the NPV at your own discount rate too.