IRR Calculator
Find the internal rate of return and NPV of an irregular cash flow series.
Inputs
Use negative values for outflows. The first entry is usually your initial investment (negative). Press Enter between values.
The hurdle rate or cost of capital used to calculate NPV.
Internal Rate of Return
17.09%
The discount rate that makes NPV = 0.
NPV at Discount Rate
$16,986.54
Positive = investment exceeds hurdle rate.
Total Undiscounted Inflows
$150,000.00
Total Undiscounted Outflows
$100,000.00
Number of Periods
4
Step by step
Number of periods
= 4
Total undiscounted inflows
= $150,000.00
Total undiscounted outflows
= $100,000.00
NPV at 10.0% discount rate
= $16,986.54
Positive NPV: the investment exceeds your hurdle rate.
IRR
= 17.09%
The discount rate at which NPV = 0.
Discounted Cash Flows
| Period | Cash Flow | Discount Factor | Present Value |
|---|---|---|---|
| 0 | -$100,000.00 | 1.0000 | -$100,000.00 |
| 1 | $30,000.00 | 0.9091 | $27,272.73 |
| 2 | $35,000.00 | 0.8264 | $28,925.62 |
| 3 | $40,000.00 | 0.7513 | $30,052.59 |
| 4 | $45,000.00 | 0.6830 | $30,735.61 |
How it works
The Internal Rate of Return (IRR) is the discount rate that makes the net present value (NPV) of a cash flow series equal to zero. In plain terms: it's the annualized return rate of an investment assuming all cash flows are reinvested at the same rate. A project is worth pursuing when IRR exceeds your cost of capital (hurdle rate). NPV, computed at your chosen discount rate, tells you whether the investment adds value in today's dollars. Positive NPV = value-creating; negative NPV = value-destroying at your cost of capital.
Formulas
NPV
NPV = Σ Cash Flow_t / (1 + r)^t
- C_t
- Cash flow at time t
- r
- Discount rate (decimal)
- T
- Final period
IRR definition
IRR is the rate r where NPV = 0
Frequently Asked Questions
Why might IRR not converge?
Some cash flow patterns have multiple sign changes (e.g., negative-positive-negative). Such series can have multiple IRRs, and bisection may find any one of them or none. If you get a convergence error, check that you have exactly one sign change, or use the Modified IRR (MIRR) approach which avoids the multiple-root problem.
What should my IRR be compared against?
Compare IRR against your hurdle rate — typically your weighted average cost of capital (WACC) or the return you could earn on an alternative investment of similar risk. If IRR > hurdle rate, the project adds value.
What's the difference between IRR and CAGR?
CAGR measures the return on a single investment with a beginning and ending value. IRR handles irregular, multi-period cash flows — including cases where you invest in multiple tranches or receive income at uneven intervals. For a single lump-sum investment and exit, IRR and CAGR will be identical.
Does IRR assume intermediate cash flows are reinvested?
Yes — IRR implicitly assumes all intermediate inflows are reinvested at the IRR rate. For high-IRR projects (e.g., 40%), this assumption is often unrealistic. MIRR (Modified IRR) corrects for this by using the cost of capital as the reinvestment rate.