IRR Calculator

The Internal Rate of Return (IRR) is the annual discount rate that makes the net present value (NPV) of a series of cash flows equal to zero. In plain terms, it is the annualized percentage return an investment is expected to earn, accounting for the timing of each cash flow.

IRR is widely used in capital budgeting, real estate, private equity, and project finance to compare investments on a common yardstick. A project with an IRR above the cost of capital is usually considered worth pursuing, while one below the hurdle rate is rejected. Because IRR is a single percentage, it is easy to compare across opportunities of different sizes.

Calculating IRR requires solving for the rate in the NPV equation, which has no closed-form solution for general cash flows. This calculator uses a bisection method that brackets the rate where NPV crosses zero and narrows it down to a precise value, with a fallback search if the default range does not bracket a solution.

Note that IRR assumes interim cash flows are reinvested at the same rate, which can overstate returns for very high-IRR projects. For those cases, the Modified Internal Rate of Return (MIRR) is a more conservative alternative. IRR also says nothing about absolute dollar return, so it is best paired with NPV when judging an investment.