IRR Calculator (Internal Rate of Return)
Find the internal rate of return — the annualized return that makes an investment’s net present value zero. Enter the cost and annual cash flows to get the IRR, benchmarked to a typical hurdle rate.
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Learn moreWhat IRR tells you
IRR is the discount rate at which an investment’s inflows exactly offset its cost — effectively its annualized compound return. The decision rule: accept a project when its IRR exceeds your hurdle rate (your required return or cost of capital). IRR is great for ranking opportunities, but for mutually exclusive projects it can disagree with NPV; when they conflict, follow NPV.
How it’s calculated & sources
IRR is the rate r that makes −investment + Σ cash flow ÷ (1+r)^t + salvage ÷ (1+r)^n = 0. Solved numerically (bisection) for equal annual cash flows. Compared to a typical 8–12% hurdle rate.
Benchmark: accept when IRR exceeds your hurdle rate / cost of capital — commonly 8–12% for business projects.
Results update as you type and are general estimates, not personalized advice. Verify with a professional.
Worked example
A $100,000 investment returning $25,000 a year for 6 years has an IRR of about 12.9% — above a typical 8–12% hurdle, so it clears the bar.
Frequently asked questions
IRR vs NPV — which wins?
NPV, when they disagree on mutually exclusive projects. IRR can mislead with unusual cash-flow timing; NPV always reflects dollar value added.
What is a good IRR?
One above your hurdle rate. For many businesses that means beating an 8–12% cost of capital; higher is better for the risk.
Does this handle uneven cash flows?
This version assumes equal annual inflows plus an optional salvage value. Uneven flows need a full cash-flow IRR.