IRR Calculator
Adjust the inputs below. Results update as you type.
How it works
IRR is the discount rate that makes NPV = 0. Entered as: initial outflow (negative), then subsequent inflows (positive) or outflows. Compare IRR to your hurdle rate (cost of capital) to decide if an investment is worthwhile. Limitations: assumes reinvestment at IRR rate (often unrealistic); multiple sign changes create multiple IRRs. MIRR addresses reinvestment rate assumptions.
Input guidance
- Use realistic rates from lender or provider quotes instead of headline averages.
- Model conservative, baseline, and optimistic scenarios before deciding.
- Include recurring real-world costs (fees, taxes, insurance, maintenance) where relevant.
The formula
The internal rate of return is the discount rate that makes a project's net present value zero: 0 = Σ cash flow_t ÷ (1 + IRR)^t. It is found numerically.
Worked example
Investing $10,000 and receiving $3,000, $4,000, and $5,000 over three years gives an IRR of about 8.9% — the annual return that equates those cash flows to the outlay.
More examples to test
- Conservative case: use a higher interest rate and lower growth assumptions to stress-test affordability.
- Optimistic case: use a lower rate with stable income assumptions to compare upside potential.
How to interpret results
Treat this as a planning model, not a final approval tool. Compare at least two scenarios and focus on total-cost and cash-flow trade-offs.
When this can be inaccurate
Results can diverge due to fees, changing rates, tax rules, lender policies, and behavior changes that simplified models cannot fully capture.
Change history
- July 2026: Quality-reviewed for publication with formula checks and explanatory copy updates.
Site-wide corrections also appear on the corrections log.
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Frequently asked questions
What does IRR tell me?+
The annualized return implied by a series of cash flows. If the IRR exceeds your required return or cost of capital, the project adds value.
Why is IRR found by iteration?+
Because the rate sits inside multiple discounting terms, there is no simple algebraic solution, so it is solved by trial and error or software.
IRR vs. NPV?+
NPV gives a dollar value at a chosen discount rate; IRR gives a percentage. They usually agree, but NPV is more reliable for comparing mutually exclusive projects.
How should I use this result?+
Treat it as a planning estimate. Compare at least two realistic scenarios, then confirm with statements, quotes, or a qualified professional before acting.
How often should I refresh assumptions?+
Refresh whenever rates, income, costs, or policy limits change materially, and before making irreversible commitments.