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IRR Calculator

Calculate the Internal Rate of Return (IRR), NPV at 10%, and payback period for any investment.

What is IRR Calculator?

The Internal Rate of Return (IRR) is the discount rate that makes the net present value (NPV) of all cash flows equal to zero. It represents the annualized rate of return an investment is expected to generate, making it one of the most widely used metrics in capital budgeting and investment analysis.

How to use

  1. 1 Enter the initial investment (the amount you invest upfront, as a positive number).
  2. 2 Enter the expected cash inflows for years 1 through 6.
  3. 3 The IRR, NPV at a 10% discount rate, and payback period are calculated automatically.
  4. 4 An IRR above your required rate of return (hurdle rate) means the investment is worth pursuing.
  5. 5 Compare IRR across multiple projects to prioritize the best opportunities.

Formula

IRR solves for r where NPV = 0: NPV = −CF₀ + CF₁/(1+r) + CF₂/(1+r)² + ... + CFₙ/(1+r)ⁿ. Solved iteratively using Newton's method.

Example calculation

Invest $50,000. Cash flows: Y1=$10,000, Y2=$15,000, Y3=$18,000, Y4=$20,000, Y5=$12,000. IRR ≈ 24.1%. NPV at 10% ≈ $11,340. Payback period ≈ 3.35 years.

Frequently asked questions

What is a good IRR?

It depends on the investment type and your cost of capital. Most businesses use a hurdle rate of 8–15%. Real estate investors often target 15–20%. Venture capital looks for 25%+. Any IRR above your hurdle rate adds value.

How does IRR differ from ROI?

ROI measures total return as a percentage of investment without accounting for the time value of money. IRR accounts for timing — a dollar received sooner is worth more than one received later.

What if I get no IRR result?

IRR may not exist or may not be unique if cash flows change sign more than once (e.g., positive then negative then positive). In such cases, use NPV as your primary metric.

What is NPV at 10%?

NPV at 10% discounts each future cash flow at 10% per year and sums them, then subtracts the initial investment. A positive NPV means the investment creates value at a 10% hurdle rate.

What does payback period tell me?

The simple payback period is how many years it takes to recover your initial investment from cumulative cash flows, ignoring the time value of money. It measures liquidity and risk, not profitability.