IRR Calculator
The internal rate of return (IRR) is the single annual percentage return at which an investment's discounted cash flows exactly equal its upfront cost — the rate that makes its net present value zero. It lets you compare projects of different sizes on a like-for-like percentage basis. This calculator works in any currency.
- Total cash flows
- $15,000.00
- Net profit
- $5,000.00
- Internal rate of return
- 15.24%
An IRR of 15.2% is the discount rate at which this investment exactly breaks even. Accept it if your required return is below 15.2%; reject it if you can earn more elsewhere for the same risk.
How it works
IRR answers the question: what constant annual return does this investment actually deliver? It is the discount rate that drives NPV to zero, so it sits at the break-even point between value created and value destroyed. Because no algebraic formula exists, the calculator solves for it numerically, searching for the rate where discounted inflows match the outlay.
The decision rule mirrors NPV. If the IRR is higher than your required return — your hurdle rate or cost of capital — the project earns more than the alternative and is worth pursuing. If the IRR is lower, you would do better elsewhere. Two projects can have the same NPV at one discount rate but very different IRRs, which is why IRR is popular for ranking opportunities by efficiency rather than absolute size.
IRR has known limits. When cash flows change sign more than once — for example an investment that requires a second outlay partway through — there can be multiple IRRs or none at all. It also implicitly assumes you can reinvest interim cash flows at the IRR itself, which may be optimistic for very high rates. For those cases, pair IRR with NPV, which behaves more predictably. The math is currency-agnostic, so switch the currency at the top to read the same return in your own.
IRR is the discount rate r that makes NPV zero: 0 = −C₀ + Σ Cₜ / (1 + r)ᵗ for t = 1…n. There is no closed-form solution, so it is found numerically. A project is attractive when its IRR exceeds your required rate of return.
Worked example
Invest 10,000 today and collect 3,000 a year for 5 years. Total cash flows come to 15,000 and net profit to 5,000. The rate that discounts those five 3,000 payments back to exactly 10,000 — the IRR — is about 15.2% per year. If your required return is, say, 10%, the project clears the bar comfortably and is worth doing.
Things to watch out for
IRR assumes interim cash flows are reinvested at the IRR, which overstates returns for very high rates; the modified IRR (MIRR) fixes this by using a separate reinvestment rate. Cash flows that switch sign more than once can produce multiple IRRs or none, in which case this calculator reports that no break-even rate exists. For mutually exclusive projects of different scale, NPV is the safer tie-breaker because a high IRR on a tiny project can create less total value than a lower IRR on a large one.
Frequently asked questions
What is a good IRR?+
There is no universal threshold — an IRR is "good" only relative to your required return for that level of risk. If the IRR comfortably exceeds your hurdle rate or cost of capital, the investment is attractive.
How is IRR different from NPV?+
NPV measures value created in currency terms at a chosen discount rate; IRR measures the percentage return that makes NPV zero. NPV needs you to supply a rate, while IRR derives one from the cash flows.
Why does the calculator sometimes say no IRR exists?+
If the cash flows never recover the upfront investment, there is no positive break-even rate, so no IRR can be computed. That itself is a clear signal the investment loses money under any required return.
Can IRR be misleading?+
Yes. It assumes reinvestment at the IRR and can return multiple values when cash flows change sign repeatedly. For ranking projects of different sizes, cross-check with NPV.
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Disclaimer: This calculator is for educational and informational purposes only and provides estimates, not financial advice. Interest rates, taxes, fees, and local rules vary and change over time. Confirm figures with a qualified professional before making any financial decision.
Last reviewed: 2026-06-22