IRR: The Return Rate Hidden in Your Cash Flows
Internal rate of return is the discount rate at which a project breaks even in present-value terms. It lets you compare projects of different sizes on one percentage.
What is the IRR Calculator?
Enter the initial investment, annual cash flow, and project length, and the tool searches for the discount rate that makes net present value zero. This is an estimate for flat cash flows only, and it is not investment advice; check the figures against real, uneven cash flows before deciding.
How to use it
- Enter the initial investment.
- Enter annual cash flow and years.
- Click Estimate IRR.
Worked example
With 10000 invested and 3000 a year for 5 years, the estimated IRR is about 15.24%.
How does IRR differ from NPV?
NPV gives a money amount at your chosen rate, while IRR gives the break-even rate itself. Used together, they tell a fuller story.
Frequently asked questions
What if no IRR is found?
That happens when cash flows never repay the investment, or always repay it, within the search range. Recheck the figures.
Is IRR enough to choose a project?
No. Compare it with your required rate and with NPV, and consider risk and timing too.