IRR Calculator

IRR is the single per-period rate that brings the net present value of your whole cash-flow stream to exactly zero. Think of it as the break-even discount rate baked into the project itself: the effective annual return your money earns for as long as it stays invested. Because it is solved straight from the figures you enter, IRR needs no outside guess about what return to expect, which is why a higher IRR signals a steeper effective return.

Compare the annualized IRR with your hurdle rate, the minimum return you require. If IRR clears the hurdle the project earns more than your cost of capital and adds value; if it falls short, you pass. There is one important caveat: this clean accept-or-reject shortcut only holds for a conventional project, meaning one initial outflow followed by inflows, so the signs change exactly once. When the cash flows flip sign more than once, lean on NPV and MIRR instead of the IRR rule.

NPV translates a project into a single dollar figure of value created at a rate you choose, while IRR translates the same flows into a single percentage and lets the project pick its own break-even rate. For a normal project they agree on the verdict, since NPV is positive precisely when IRR beats your discount rate, yet they can still rank competing projects differently. The tool shows both at once — a 19.44% IRR sitting beside an NPV of roughly $14,150 at a 10% hurdle in the default example.

Plain ROI is total profit over money invested with no clock attached, so it cannot distinguish a one-year double from a ten-year one. CAGR pins a single start and end value to one smooth annual rate but assumes nothing happens in between. IRR is the timing-weighted cousin of both: it accounts for exactly when each deposit and withdrawal lands, which is why an uneven, multi-period stream calls for IRR rather than ROI or CAGR.

MIRR, the modified internal rate of return, swaps out IRR's hidden assumption that every inflow is reinvested at the IRR for an explicit reinvestment rate you set, while discounting outflows at a separate finance rate. Formally it is the future value of inflows compounded at the reinvest rate, divided by the present value of outflows discounted at the finance rate, all raised to the power 1/n, minus one. MIRR is always a single number, and it pulls furthest from IRR when the IRR is high: the default project shows 19.44% IRR but a 15.62% MIRR with finance and reinvest both set to 10%.

Yes. Whenever the cash flows change sign more than once, the NPV equation can cross zero at several rates, so multiple IRRs are all mathematically valid. The classic teaching stream [−4,000, +25,000, −25,000] is solved by both 25% and 400%. This tool scans a grid to surface every root it can find, and when more than one appears you should treat the IRR decision rule as unreliable and judge the project by its NPV at your hurdle rate and by MIRR.

An internal rate of return only exists when the stream contains both inflows and outflows, because there must be at least one sign change for NPV to cross zero. If every entry carries the same sign — all money out or all money in — then no rate can drive the present value to zero, so there is simply no solution to return. Add the missing initial investment or the eventual payout and a rate will appear.

The solver first finds the rate per period, matching whatever spacing you chose, whether annual, quarterly or monthly. That periodic rate is then annualized by effective compounding, so annual equals (1 + periodic) raised to the periods-per-year power, minus one, and a monthly figure is shown alongside for convenience. When your periods are annual the periodic and annualized rates coincide, which is exactly the number a spreadsheet's IRR() function returns.

Use your opportunity cost of capital: the return available on a comparable-risk alternative, often a blended cost of debt and equity, or simply the rate you would otherwise accept. This rate drives both the NPV and the accept-or-reject comparison, so raising it shrinks NPV and lifts the bar your IRR must clear. No single figure is universally correct; pick one that reflects your risk and your next-best use of the money.

Simple payback counts how long cumulative inflows take to recover your outlay and ignores the time value of money completely. Discounted payback first shrinks each future inflow to its present value and then measures recovery, so it always comes out longer than the simple version. For the default project that works out to about 3.25 years simple against 3.96 years discounted; both are handy liquidity gut-checks, but neither replaces NPV or IRR.

The profitability index divides the present value of your inflows by the present value of your outflows, expressing value created per dollar invested. A reading above 1 means the project clears your discount rate — it exceeds 1 exactly when NPV is positive — while a reading below 1 means it destroys value. The default example lands near 1.283, roughly $1.28 of discounted return for every $1 of discounted cost.

Because IRR is a rate, it is blind to both scale and length: a small, short project can post a dazzling percentage while creating far fewer dollars than a large one with a humbler IRR. It also assumes you can reinvest interim cash at that same high rate, which quietly flatters longer projects. When you must choose between mutually exclusive options of different size or duration, rank them by NPV and cross-check MIRR rather than trusting the headline IRR.

Use this IRR calculator when your cash flows fall at even intervals — period 0, then 1, 2, 3 and so on — describable by a single periods-per-year setting. Reach for the sibling XIRR calculator when the flows land on irregular calendar dates, since XIRR weights each one by its exact date rather than by an equal period. The underlying math is the same; the difference is purely how time is handled, even periods here and real dates there.

No. IRR is a pure arithmetic property of the numbers you enter, and it knows nothing about how risky or how nominal those flows are. You introduce risk and inflation through the discount or hurdle rate you measure it against: demand a higher hurdle for riskier projects, and use a real, inflation-adjusted hurdle if your cash flows are stated in today's money. The IRR itself stays nominal whenever your inputs are nominal.

IRR quietly assumes that every interim inflow is reinvested at the IRR itself right through to the end of the project, an optimistic stance when the IRR happens to be high. This is precisely the gap MIRR was designed to close, because it lets you state a reinvestment rate you actually believe in. If you doubt you could redeploy that cash at the IRR, treat MIRR as the more honest measure of return.

You invest $50,000 today and then collect $12,000, $15,000, $18,000, $20,000 and $22,000 over the following five years, which is $87,000 returned and a $37,000 net profit. The rate that zeroes NPV is an IRR of about 19.44%, and at a 10% hurdle the project's NPV is roughly $14,150 with a profitability index near 1.283. Switch to MIRR at a 10% reinvest rate and the return moderates to 15.62%, with simple payback around 3.25 years and discounted payback near 3.96.

A negative IRR means the rate that balances the NPV equation sits below zero, so you are getting back less than you put in on a time-weighted basis and the project loses money. It is still the correct break-even discount rate; it just falls into negative territory. Compare it to your hurdle the usual way, and remember that a negative IRR is below any positive hurdle, so the project fails the accept test.

Record money leaving you as negative and money coming back as positive, with period 0 normally holding your initial investment as a negative outflow. Keep the spacing even and set the periods-per-year selector to match it, whether monthly, quarterly or annual, since the tool treats every step as one equal period. Signs matter: without at least one outflow and one inflow there is no sign change, and therefore no IRR to solve for.