IRR Calculator
Internal rate of return on cash flows.
Reviewed by the Calculation Machine team · Updated 24 October 2026 · How we check our maths
Your values
ⓘ Live results
- IRR
- 10.41%
- Total cash returned
- $65,000.00
- Net profit
- $15,000.00
- Simple multiple
- 1.3×
- NPV at 10%
- $489.72
Quick answer
The internal rate of return (IRR) is the annual discount rate that makes the net present value of an investment's cash flows exactly zero. You find it by trial and error: guess a rate, discount every cash flow, and adjust until the total equals the upfront cost. Investing $50,000 to receive $12,000, $15,000, $18,000 and $20,000 over four years gives an IRR of 10.41%.
What the IRR calculator does
Enter what you put in up front and the cash you expect back each year, and this calculator solves for the IRR. It also shows the total cash returned, net profit, the simple cash multiple and the net present value at a 10% discount rate, so you can see the same project from several angles.
IRR is the standard yardstick for comparing projects, rental properties, equipment purchases and private investments of different sizes, because it turns any pattern of cash flows into one annual percentage. Compare it with your hurdle rate: the return you could earn elsewhere at similar risk, or your cost of capital.
The calculator assumes the initial outlay happens today and each cash flow arrives at the end of a year, evenly spaced. For irregular dates or monthly flows, results will differ from a spreadsheet's XIRR. Include any sale proceeds in the final year's figure.
The formula
0 = −C₀ + CF₁ ÷ (1 + IRR)¹ + CF₂ ÷ (1 + IRR)² + … + CFₙ ÷ (1 + IRR)ⁿ
| Symbol | Meaning | Unit |
|---|---|---|
| C₀ | Initial investment paid today | $ |
| CFₜ | Net cash flow received at the end of year t | $ |
| n | Number of years of cash flows | years |
| IRR | The rate that makes the equation balance | % per year |
There is no algebraic solution once there are more than a few cash flows, so the calculator searches numerically (bisection) for the rate where NPV crosses zero, the same idea behind Excel's IRR function. The method is standard in corporate finance texts such as Brealey, Myers and Allen.
IRR can mislead when cash flows change sign more than once (for example, a large repair bill in year 3), because the equation can then have several valid answers. In that case rely on NPV or the modified IRR (MIRR).
Worked examples
Rising cash flows over four years
A small business spends $50,000 on a delivery van expected to bring in $12,000, $15,000, $18,000 and $20,000 of extra profit over four years.
Inputs
- Initial investment50000 $
- Yearly cash flows (comma separated)12000, 15000, 18000, 20000
Result
- IRR10.41%
- Total cash returned$65,000.00
- Net profit$15,000.00
- Simple multiple1.3×
- NPV at 10%$489.72
An IRR of 10.41% is only just above a 10% hurdle, which is why NPV at 10% is a thin $489.72. If the business borrows at 9% this is marginal; a resale value in year 4 would lift the IRR noticeably.
Level cash flows from equipment
A manufacturer pays $120,000 for a machine that saves $30,000 a year for five years and has no resale value.
Inputs
- Initial investment120000 $
- Yearly cash flows (comma separated)30000, 30000, 30000, 30000, 30000
Result
- IRR7.93%
- Total cash returned$150,000.00
- Net profit$30,000.00
- Simple multiple1.25×
- NPV at 10%-$6,276.40
Total cash returned is $150,000, a 1.25× multiple, yet the IRR is only 7.93% and NPV at 10% is negative. A 25% profit spread over five years is a modest annual return.
Rental property with a sale at the end
An investor puts $60,000 of equity into a rental, takes $4,000 a year of net rent for four years, then receives $4,000 of rent plus $71,000 of sale proceeds in year five.
Inputs
- Initial investment60000 $
- Yearly cash flows (comma separated)4000, 4000, 4000, 4000, 75000
Result
- IRR9.69%
- Total cash returned$91,000.00
- Net profit$31,000.00
- Simple multiple1.52×
- NPV at 10%-$751.44
The 1.52× multiple looks better than the van, but because most of the money comes back in year five the IRR is 9.69%. IRR rewards getting cash back sooner.
What counts as a good IRR
A good IRR is one that beats the return you would need to justify the risk. Typical hurdle rates people use:
| Investment type | How the hurdle is usually set |
|---|---|
| Corporate project | The company's weighted average cost of capital (WACC), plus a margin for risky projects |
| Debt-financed purchase | At least the loan's interest rate, ideally several points above |
| Rental property | Compared with a diversified stock or REIT index return over the same period |
| Private equity or venture | Higher targets, often 20% or more, because of illiquidity and failure risk |
| Personal savings decision | The rate on a safe alternative such as Treasury bills or a high-yield savings account |
IRR versus NPV, multiple and payback
- NPV tells you how many dollars of value a project adds at your chosen rate. When two projects conflict, NPV is the better guide because IRR ignores scale: 50% on $1,000 adds less than 15% on $1 million.
- Cash multiple (total returned ÷ invested) ignores timing entirely, so a 2× return over 3 years and over 15 years look the same.
- Payback period shows how quickly the outlay comes back but ignores everything after that point. Use the payback period calculator as a liquidity check, not a profitability test.
- IRR captures timing and is easy to compare across sizes, but it implicitly assumes interim cash can be reinvested at the IRR itself, which flatters very high IRRs.
Entering cash flows correctly
Use net cash flows: income minus running costs, taxes and maintenance in each year. Put the sale price or salvage value, minus selling costs, into the final year. If a year has a net outflow, enter it as a negative number. Do not include financing payments if you entered the full purchase price as the initial investment; if you entered only your equity, subtract loan payments from each year's cash flow so the two sides match.
How to use the IRR Calculator
- 1Enter the upfront cost as a positive dollar figure, including fees and setup costs.
- 2Type each year's net cash flow in order, separated by commas, starting with year 1. Use a minus sign for any year with a net outflow.
- 3Add any sale or salvage value to the last year's number.
- 4Read the IRR and compare it with your hurdle rate; check NPV at 10% and the cash multiple for context.
Frequently asked questions
What does an IRR of 10% mean?
It means the investment earns the equivalent of 10% a year compounded on the money still tied up in it. If your money could earn more elsewhere at similar risk, the project is not worth it.
Can IRR be negative?
Yes. If the cash you get back is less than you put in, the IRR is negative, showing the annual rate at which you are losing money.
What is the difference between IRR and ROI?
ROI is total profit divided by cost, with no allowance for how long it takes. IRR is an annual rate that accounts for timing, so it is the better way to compare investments of different lengths. The ROI calculator gives the simple figure.
Why does Excel give a different IRR?
Check that the initial investment is entered as a negative cell in Excel and that the periods match. Excel's XIRR uses actual dates, so it will differ from this yearly-period calculation when flows are irregular.
What is MIRR?
The modified internal rate of return assumes interim cash flows are reinvested at a rate you choose (often your cost of capital) rather than at the IRR. It gives a single, more conservative answer and avoids the multiple-IRR problem.
References
- Principles of Corporate Finance — Brealey, Myers and Allen (McGraw Hill)
- CFA Program Curriculum – Capital Budgeting — CFA Institute
About this calculator
- Built and reviewed by the Calculation Machine team · How we build and test calculators
- Last reviewed: October 24, 2026
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