Internal Rate of Return (IRR) Calculator
Calculate the Internal Rate of Return (IRR), net cash flow and the net present value (NPV) at a discount rate of your choice from the initial investment and periodic cash flows.
Things to keep in mind:
- IRR implicitly assumes interim inflows are reinvested at the IRR itself, which is often unrealistic. Use it together with NPV and payback.
- Irregularly dated flows (XIRR) are not supported; all periods are equal in length and at most 10 periods can be entered.
- Cash flows that change sign several times may produce multiple or meaningless IRRs.
- Taxes, inflation and risk are ignored; this is not investment advice.
Calculator
Result
Enter the values and press Calculate to see the result here.
About this tool
The Internal Rate of Return (IRR) is the discount rate that makes the net present value (NPV) of an investment equal to zero; in other words, the compounded return per period. A project is attractive when its IRR exceeds the cost of capital or your required return. Besides the IRR, the tool gives an NPV check and the modified internal rate of return (MIRR).
Formula
- IRR: 0 = CF0 + CF1/(1+IRR) + CF2/(1+IRR)² + … + CF10/(1+IRR)¹⁰. It cannot be solved in closed form, so the tool finds the IRR numerically (bisection).
- NPV check: Σ CFk / (1 + discount)^k, k = 0…10.
- MIRR: (inflows compounded to the last period at the reinvestment rate ÷ outflows discounted to today at the finance rate)^(1 / n) − 1, where n is the period of the last non-zero flow. With "Use separate rates for MIRR" off, both rates equal the discount rate.
- Results are rounded HALF_UP to 2 decimals.
Input
Period 0 is usually the negative investment outflow; periods 1-10 are the net inflow or outflow at the end of each period. Leave unused periods at 0. If periods are years the IRR is annual; monthly flows give a monthly rate.
Example
An investment of -1,000 followed by inflows of 300, 400 and 500; discount rate 10%. Total inflows are 1,200, net flow 200 and the IRR is about 8.90%. At a 10% discount rate the NPV is -21.04, so the project misses a 10% hurdle. For MIRR the inflows are compounded at 10% to the last period: 300 × 1.10² + 400 × 1.10 + 500 = 1,303; the cube root of 1,303 / 1,000 gives a MIRR of 9.22%. If inflows never repay the investment the IRR is negative.
How to read the result
Compare the IRR with your cost of capital or required return; if it is higher, the NPV at that discount rate is positive. Because IRR assumes interim inflows are reinvested at the IRR itself, it can be optimistic for high-return projects; MIRR uses a more realistic reinvestment assumption and always gives a single rate. Use the results together with NPV and payback rather than on their own.
How to use
- Enter the period 0 investment as a negative number (e.g. -1000).
- Enter the net inflow or outflow for each following period; leave unused periods at 0.
- Optionally enter your cost of capital as the discount rate for the NPV check.
- Click Calculate and compare the IRR with your discount rate or required return.
Notes
Results are rounded HALF_UP to 2 decimals. Cash flows are assumed to occur at period ends and to be equally spaced (same logic as Excel IRR). The IRR is searched between -99.9999% and 100,000%. At least one negative and one positive flow are required. With several sign changes multiple IRRs may exist; the tool returns one of them. MIRR = (inflows compounded to the last period at the reinvestment rate / outflows discounted to today at the finance rate)^(1 / n) − 1, where n is the period of the last non-zero flow (as Excel MIRR, excluding trailing zero flows). Without both positive and negative flows MIRR shows 0.
Sources
Frequently asked questions
IRR is the discount rate at which the NPV of the investment equals zero, i.e. the project's compounded return per period. For yearly periods it is the annual return.
A project is attractive when its IRR exceeds your cost of capital (WACC) or required minimum return. IRR is best used to compare projects of similar risk.
When total inflows are smaller than the investment (net cash flow is negative) the project does not even return the principal, so the IRR is negative.
NPV gives the value gap in currency at a chosen discount rate, while IRR is the rate at which NPV is zero. Setting the discount rate equal to the IRR makes the NPV check about zero.
Yes, but the result is a monthly rate. Annualise with (1 + monthly IRR)^12 − 1.
IRR assumes interim inflows are reinvested at the IRR itself, which overstates returns for high-IRR projects, and cash flows with several sign changes can have more than one IRR. MIRR values inflows at a realistic reinvestment rate and outflows at the finance rate and always gives a single rate.
Next step
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