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Internal Rate of Return Calculator

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Your Results

This project's internal rate of return is 11.46% a year: the discount rate at which its NPV is zero. That's above your 10% required return, and the NPV at that rate is $54.80, so the project is worth doing.

11.46%
Internal rate of return, per year
$54.80
NPV at 10%
$1,750.00
Total Cash In
$550.00
Net Gain
45.83%
Total Return

NPV at different discount rates

  • NPV
  • IRR
  • Required return

See its value in today's dollars: Net Present Value. See how long it takes: Payback Period or Discounted Payback. Compare it with another project: Crossover Rate. Use a realistic reinvestment rate: Modified IRR.

Cash Flow Table
YearCash FlowDiscount RatePresent Value
0-$1,200.00-$1,20011.46%-$1,200.00-$1,200
1$150.00$15011.46%$134.58$135
2$250.00$25011.46%$201.25$201
3$350.00$35011.46%$252.79$253
4$450.00$45011.46%$291.61$292
5$550.00$55011.46%$319.77$320
Total––$0.00$0

Discounted at this rate, the cash flows add up to $0. That's what makes it an IRR.

What Is the Internal Rate of Return?

The internal rate of return (IRR) is the yearly return an investment earns, based on when its cash comes in. More exactly, it's the discount rate at which the project's net present value (NPV) is zero. If the IRR is higher than the return you require, the project is generally worth doing.

What to watch for

  • Some projects have more than one IRR: this can happen when cash flows change between positive and negative more than once, such as a big repair in a later year. Rely on NPV instead.
  • Some have no IRR: the NPV may never reach zero at any rate.
  • IRR ignores size: a 50% return on $100 earns far less than a 15% return on $100,000. When choosing between projects, compare their NPVs.

Which calculator should I use?

How to Calculate the Internal Rate of Return

The IRR is the rate that makes the present values of all the cash flows, including the investment, add up to zero:

∑t=0n Ct(1+IRR)t =0
  • Ct: the cash flow in year t. Year 0 is the investment, as a negative number.
  • IRR: the internal rate of return.
  • n: the number of years of cash flows.

This equation can't be rearranged to give the IRR directly, so it's found by trial and error, which the calculator does for you.

Example

A $1,200 investment with cash flows of $150, $250, $350, $450 and $550:

  • Discounted at 11.46%, their present values are $134.58, $201.25, $252.79, $291.61, $319.77.
  • Those add up to $1,200, the same as the investment, so the total is $0 and the IRR is 11.46%.
  • At a 10% required return, the NPV is $54.80. The IRR is above 10%, so the project is worth doing.

How to Use the Internal Rate of Return Calculator

"If I invest $1,200 and get back $150, $250, $350, $450 and $550 over five years, what yearly return am I earning, and does it beat the 10% I need?" This calculator answers that.

Let's enter the numbers for this example in each box. They are already filled in when the calculator opens, so you can follow along and then change any box to match your own project.

  • Initial Investment: Enter 1,200, which is what you pay at the start. Enter a positive number; the calculator treats it as money going out.
  • Required Return: Enter 10, which is the yearly return the project must earn to be worth doing. It decides the NPV and the verdict, but doesn't change the IRR. It must be from 0 to 99.99.
  • Number of Years: Choose 5, which is how many years of cash flows you have, from 1 to 12.
  • Year 1 to Year 5: Enter 150, 250, 350, 450 and 550, which is the cash you receive each year. A year can be negative if the project costs you money that year.

Calculate and Reset

Click Calculate to see your results. If a box has a problem, such as an investment of 0, a message pops up under that box instead. With the default numbers you get:

  • Your Results: a short summary in words: the IRR (11.46%), how it compares with your required return, and the NPV. It also tells you if there's no IRR, or more than one.
  • Internal Rate of Return: the headline number.
  • NPV, Total Cash In, Net Gain and Total Return: $54.80, $1,750.00, $550.00 and 45.83%.
  • NPV chart: the project's NPV at different discount rates, with dots at the IRR, where it crosses zero, and at your required return. Links under it open the Payback Period, Discounted Payback, Crossover Rate and Modified IRR calculators with your numbers filled in.
  • Cash Flow Table: each year's cash flow, the discount rate and the present value, adding up to $0. Download Excel saves it with the formulas, so you can change a number and see the IRR update.
  • Share Results: a link that opens this calculator with your numbers filled in. Copy it, or share it on Facebook or X.

Amounts of $1 million or more are shortened, for example $1.25M. Click Reset to put every box back to its default and show the default results again.

Video: How to Use the Internal Rate of Return Calculator