INTERNAL RATE OF RETURN

IRR Calculator

Find the annual internal rate of return that makes NPV zero for one investment and equal end-of-year cash flows.

The rate that sets NPV to zero

Internal rate of return is the annual discount rate at which this equal-period project’s NPV is $0. Compare that rate with a required return: if IRR is higher, NPV at the hurdle rate is positive. XIRR annualizes dated irregular cash flows. ROI divides undiscounted profit by cost and is not a rate of return over time.

Find r such that annual cash flow × (1 − (1 + r)⁻ⁿ) ÷ r = initial investment
At IRR = 0%, total inflows equal the investment

Example

Invest $100,000 and receive $30,000 a year for 5 years. IRR is about 15.24%. Total inflows are $150,000, so the undiscounted surplus is $50,000. If the investment equals those five inflows at $150,000, IRR is 0%. If the investment is $200,000, IRR is negative.

What this solver leaves out

Annual cash flow must be positive so the project can recover the outlay. Unequal yearly amounts, a terminal sale, and monthly timing stay outside this Excel-style IRR on equal periods. Multiple sign changes can produce more than one IRR; this page uses one outflow then n inflows, so the root is unique.

Frequently asked questions

Is this Excel IRR?

It is the same identity for one negative outlay followed by equal positive periods. Excel IRR also accepts mixed signs, which can have several roots.

How is this different from XIRR?

XIRR uses calendar dates and a 365-day year. This page uses whole years of equal cash flow.

Can IRR be negative?

Yes, when total inflows are less than the investment.

Does a higher IRR always win?

No. Scale and timing still matter. NPV at your required return is the value-added test.

More calculators

XIRR Calculator →NPV Calculator →ROI Calculator →

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