IRR Calculator — Internal Rate of Return for Investments

Quick Answer

IRR (Internal Rate of Return) is the discount rate that makes the Net Present Value (NPV) of all cash flows equal to zero. It represents the annualized effective return of an investment. A project with IRR > cost of capital (WACC or hurdle rate) is worth pursuing. institutional investors typically use a 15-20% hurdle rate for private equity deals.


IRR (Internal Rate of Return) is the gold standard for evaluating multi-year projects — business expansions, equipment purchases, real-estate developments. It’s the discount rate at which the project’s Net Present Value equals zero. If IRR > your hurdle rate, the project creates value. Below, it destroys value.

IRR Calculator

Compute the Internal Rate of Return for any project — the discount rate at which NPV = 0.


Negative for investments, positive for returns. Start with initial outlay (year 0).

IRR Analysis

IRR (Annualised)–
NPV @ 10%–
Total Invested–
Total Returned–
Net Cash–

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Why IRR Beats Simple ROI for Projects

ROI is a single percentage. IRR factors in when each cash flow happens. A project returning $100K split over 5 years is worth less than a project returning $100K in year 1 — IRR captures that. ROI doesn’t.

Most enterprise CFOs use a hurdle rate — typically 10–15% — and accept any project with IRR above it.

The Math

NPV = Σ CFt / (1 + IRR)t = 0

IRR is the rate that makes NPV equal zero. There’s no closed-form solution; the calculator uses bisection search to converge on the rate.

Worked Example

Example: New product line: $100,000 upfront investment (year 0), then revenues of $20K, $30K, $40K, $50K, $60K over years 1–5. Total returned $200K vs $100K invested = 2× MoM. IRR ≈ 22.1% per year. NPV at 10% discount rate ≈ $44,200 (creates value).

IRR vs NPV — Which to Trust?

  • NPV tells you the absolute dollar value created. Best for ranking projects of different sizes.
  • IRR tells you the rate of return. Best for comparing projects to your hurdle rate.
  • When they conflict (different scale or timing), trust NPV. IRR can mislead when projects have unusual cash-flow patterns (e.g., late large outflows, multiple sign changes).

Common IRR Pitfalls

  • Multiple IRRs: if cash flows change sign more than once, IRR may have multiple solutions. Use NPV instead.
  • Reinvestment assumption: IRR assumes you can reinvest interim cash flows at the IRR itself. Often unrealistic at high IRRs. Modified IRR (MIRR) fixes this.
  • Doesn’t account for project size: a 50% IRR on $1K is less valuable than a 20% IRR on $10M.

Frequently Asked Questions

IRR vs XIRR — what’s the difference?▾
IRR assumes equally spaced (annual) cash flows. XIRR handles arbitrary dates. For SIPs and irregular real-world cash flows, use XIRR.
What’s a good IRR for a business project?▾
Depends on risk and your hurdle rate. Stable corporates use 10–12%. Startups and venture investors use 25–40%+. The general rule: IRR must clear your cost of capital + a risk premium.
Why does IRR sometimes fail or return strange numbers?▾
If all cash flows are the same sign, IRR is undefined. If cash flows change sign multiple times, multiple IRRs may exist. The calculator picks one in the standard range; cross-check with NPV for sanity.
Should I use IRR for evaluating stock investments?▾
Use CAGR for single in/single out, XIRR for SIPs, IRR for projects with regular annual cash flows.

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