Overview

The IRR (Internal Rate of Return) Calculator finds the discount rate that makes an investment's NPV equal to zero — effectively the expected rate of return. If IRR exceeds the cost of capital, the investment is considered worthwhile. It is widely used in project evaluation, real estate, and private equity performance measurement.

Formula

NPV = 0 = Σ (CFₜ ÷ (1 + IRR)ᵗ) − Initial Investment
IRR is the rate r that satisfies this equation, solved iteratively (e.g., Newton-Raphson method).

How to Use

1. 1Enter the initial investment amount.
2. 2Enter the expected cash flow for each period.
3. 3Click 'Calculate' to see the IRR.
4. 4Compare the IRR to your cost of capital to assess the investment.

Tips

• ✔IRR above the cost of capital signals a worthwhile investment; below it suggests otherwise.
• ✔Multiple IRRs may exist when cash flow signs change more than once.
• ✔When comparing projects of different sizes, prioritize NPV over IRR.
• ✔MIRR (Modified IRR) provides a more realistic reinvestment assumption.
• ✔Perform sensitivity analysis for long-term investments where IRR uncertainty is higher.

FAQ