IRR Calculator
Find the internal rate of return of a project or investment from its cash flows, and the net present value at your own discount rate.
The internal rate of return is the discount rate that makes the net present value of a series of cash flows zero. A machine that costs $16,000 and returns $2,000 in year 1, $4,000 in year 2 and $5,000 a year in years 3 to 6 has an IRR of 14.09%, so it beats any cost of capital below that. At 10%, its NPV is $2,222.58.
This calculator turns the cash flows you enter into an internal rate of return and a net present value for general education. It does not know whether those cash flows will happen, how risky they are, or how they are taxed, and it is not financial advice, investment advice, tax advice or a recommendation to buy, sell or hold anything. It assumes equally spaced periods and reinvestment at the IRR, and it leaves out fees, taxes and inflation unless you build them into the amounts. Consult a qualified financial or tax professional about your own situation.
Internal rate of return
14.09%
- NPV at 10%
- $2,222.58
- Money in (sum of inflows)
- $26,000.00
- Money out (sum of outflows)
- -$16,000.00
- Periods after time 0
- 6
IRR assumes equally spaced periods and that cash received is reinvested at the IRR itself.
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About the IRR Calculator
Net present value discounts each future cash flow back to today and adds them up, with the cost at time 0 counted as a negative amount. The internal rate of return is the rate at which that sum is exactly zero, so it is the rate the cash flows imply, if cash received along the way can be reinvested at that same rate. If the IRR is above your cost of capital or the return you require, the project adds value; if it is below, it does not. For most cash flow series there is no direct formula, so the calculator scans every rate from -99% to 1,000% and narrows in on each one where the NPV crosses or touches zero. The default is the embroidery machine example from OpenStax Principles of Finance: -16,000 at the start, 2,000 in year 1, 4,000 in year 2 and 5,000 in each of years 3 to 6, an IRR of 14.09%. Enter one amount per line, money out as a negative number, and add a rate to see the NPV.
Frequently asked questions
Why does my project show two IRRs?+
When the cash flows change from negative to positive and back again, more than one rate can make the NPV zero. The flows -100, 230 and -132 have IRRs of both 10% and 20%. In that case the IRR alone cannot rank the project, so compare NPVs at your own discount rate instead. Some series have no IRR at all.
What is the difference between IRR and NPV?+
NPV is an amount of money: what the project is worth today at a chosen rate. IRR is a percentage: the rate at which that worth is zero. IRR ignores the size of a project, so a small project can have a higher IRR than a large one that adds more value.
Why might IRR overstate a return?+
The IRR assumes that cash received along the way is reinvested at the IRR itself. If the money can only be reinvested at a lower rate, the return over the whole project is lower than the IRR suggests.
Do the periods have to be years?+
They must be equal in length. If you enter monthly cash flows, the IRR is a monthly rate; multiply 1 plus that rate by itself 12 times and subtract 1 to turn it into a yearly rate.
IRR as the discount rate that sets the present value of the inflows equal to that of the outflows, the embroidery machine example with an IRR of 14.09%, and the limits on multiple IRRs, reinvestment and scale: OpenStax, Principles of Finance, section 16.3, Internal Rate of Return (IRR) Method.
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