IRR Calculator (Internal Rate of Return)
Free IRR calculator. Enter a series of cash flows and instantly find the internal rate of return, with the NPV formula and worked example shown.
Updated 2026-06-14 · Free · No sign-up · Runs privately in your browser
Enter the cash flow for each period, one per line. Period 0 is usually the initial investment (a negative number). Example: -1000, 300, 420, 680.
Show the formula & steps
How the IRR Calculator Works
The internal rate of return (IRR) is the single discount rate that makes an investment’s net present value (NPV) equal to zero. In plain terms, it is the annualized percentage return your cash flows actually earn. Enter the cash flow for each period — the first one (period 0) is usually your initial outlay as a negative number — and the calculator solves for the rate.
The Formula
IRR is the rate r that satisfies:
0 = CF₀ + CF₁ / (1 + r)¹ + CF₂ / (1 + r)² + … + CFₙ / (1 + r)ⁿ
Because r appears inside every denominator and is raised to different powers, you cannot rearrange the equation to isolate it. Instead, IRR is found numerically — testing rates until NPV crosses zero. This calculator uses the bisection method on a sign-changing bracket to converge on the answer.
Worked Example
Suppose you invest $1,000 today and receive $300, $420, and $680 at the end of the next three periods:
- Cash flows: −1,000, 300, 420, 680
- We need the rate r where: −1,000 + 300/(1+r) + 420/(1+r)² + 680/(1+r)³ = 0
- Testing rates, NPV reaches zero at r ≈ 16.34%
So this investment earns an internal rate of return of about 16.34% per period.
| Discount rate | NPV of the example flows |
|---|---|
| 0% | +400.00 |
| 10% | +130.73 |
| 16.34% (IRR) | ≈ 0.00 |
| 25% | −143.04 |
Using IRR for Decisions
Compare the IRR to your hurdle rate (your cost of capital or required return). If IRR is higher than the hurdle rate, the project is expected to create value; if lower, it destroys value. When ranking competing projects, however, NPV is often the more reliable tie-breaker, because IRR can be misleading for projects of different sizes or with cash flows that change sign more than once.
Limitations to Keep in Mind
IRR assumes interim cash flows are reinvested at the IRR itself, which can overstate returns for very high rates — the modified IRR (MIRR) addresses this. Also, cash flows that switch between negative and positive multiple times can produce multiple IRRs or none at all, so always sanity-check the result against the NPV at that rate.
Frequently asked questions
What is the internal rate of return (IRR)?+
IRR is the discount rate at which the net present value (NPV) of all cash flows from an investment equals zero. It is the effective annualized return the investment earns over its life, expressed as a percentage per period.
How do you calculate IRR?+
Set the NPV equation to zero and solve for the rate r: 0 = CF0 + CF1/(1+r) + CF2/(1+r)^2 + ... + CFn/(1+r)^n. Because r appears in every denominator, there is no closed-form answer, so it is found by trial and error or numerically, which is what this calculator does.
What is a good IRR?+
A good IRR is one that exceeds your required rate of return or cost of capital (hurdle rate). If a project's IRR is higher than the rate you could earn elsewhere at similar risk, it adds value. Many investors look for double-digit IRRs, but the right threshold depends on risk.
What is the difference between IRR and NPV?+
NPV gives the dollar value an investment adds at a fixed discount rate, while IRR gives the percentage rate that would make that NPV exactly zero. NPV is an amount; IRR is a rate. They use the same cash flows and discounting math.
Why does my cash flow have no IRR?+
IRR requires at least one negative and one positive cash flow so the NPV curve crosses zero. If all flows have the same sign, no rate makes NPV zero. Cash flows that change sign more than once can also have multiple IRRs or none.