IRR Calculator
Enter an initial investment (as a negative number) and each period's cash flow to find the internal rate of return.
How This Works
IRR finds the discount rate at which NPV equals exactly zero — the effective annualized return the cash flows imply. It's found by testing rates until the NPV crosses zero (bisection search).
Formula
Example
An initial $10,000 investment returning $3,000, $4,000, $4,000, $3,000 and $2,000 over 5 years has an NPV of about $2,329.20 at 10%, and an IRR of about 19.25%.
Frequently Asked Questions
What does a positive NPV mean?
A positive NPV means the investment is expected to generate more value than the discount rate requires — generally a good sign. A negative NPV suggests the investment underperforms that required rate.
How is IRR different from NPV?
NPV gives a dollar value at a chosen discount rate. IRR gives a percentage rate — the discount rate at which NPV would be exactly zero — making it easier to compare against a required rate of return.