FREE TOOL · NO ACCOUNT NEEDED · PURE MATH
IRR Calculator
Enter an initial investment and annual cash flows for up to 8 years. Get the internal rate of return with an automatic accept/reject verdict against your hurdle rate — and a plain-English summary of what the IRR means for your decision.
Enter the upfront cost (positive number — treated as Year 0 outflow).
Your cost of capital or required minimum return. Leave blank to skip the accept/reject verdict.
What Is the Internal Rate of Return?
The internal rate of return is the discount rate at which the net present value (NPV) of all cash flows from an investment equals zero. In plain terms: it's the actual annualized return the project delivers. Compare it to your hurdle rate (cost of capital or required return) to make the accept/reject call:
| Condition | Meaning | Decision |
|---|---|---|
| IRR > Hurdle Rate | Project earns more than the cost of capital | Accept |
| IRR = Hurdle Rate | Project breaks even on a risk-adjusted basis | Marginal |
| IRR < Hurdle Rate | Project earns less than the cost of capital | Reject |
The IRR formula cannot be solved algebraically — it requires iteration. This calculator uses Newton-Raphson with a bisection fallback, searching a broad range from −99% to 1,000% to find the primary IRR.
How to Use This Calculator
Enter the initial investment
Type the upfront cost as a positive number. The calculator treats this as a Year 0 outflow (the money you put in).
Add annual cash flows
Enter net cash flows for each year (Year 1 through 8). Positive values are inflows; negative values are additional outflows. Minimum two years required.
Set your hurdle rate (optional)
Enter your cost of capital or required minimum return. Leave blank to see just the IRR — add the hurdle rate for the accept/reject verdict and NPV summary.
Read the verdict
The calculator shows IRR, break-even year, NPV at your hurdle rate, and a plain-English summary of whether the investment beats your cost of capital.
Key Concepts
IRR vs. NPV — which to use?
Both derive from the same discounted cash flow math. NPV gives you an absolute dollar value added; IRR gives you a rate you can compare to your hurdle. For mutually exclusive projects (choose one or the other), NPV wins — a project with a lower IRR can still add more absolute value if it is larger. Use IRR for a go/no-go decision on a single project; use NPV to rank alternatives.
Multiple IRRs
When a project's cash flows change sign more than once (e.g., positive, then negative again, then positive), the IRR equation can have multiple mathematical solutions — one for each sign change. This is common in mining, real estate, and multi-phase projects with large decommissioning costs. When this happens, the calculator flags the warning and shows the primary IRR, but the NPV profile is the more reliable decision tool.
Hurdle rate and WACC
The hurdle rate is typically set equal to the weighted average cost of capital (WACC) — the blended cost of debt and equity financing. Use our WACC calculator to find the right hurdle rate for a public company. Management sometimes adds a risk premium above WACC for more speculative projects.
IRR in investment analysis
Private equity and venture capital funds often report IRR as the primary performance metric. For stock market investments, IRR is analogous to a compound annual growth rate (CAGR) that accounts for the timing of cash flows. If you invest irregularly over time and receive dividends or proceeds at different times, IRR captures the true time-weighted return better than a simple percentage gain.
Frequently Asked Questions
What is the internal rate of return (IRR)?
IRR is the discount rate that makes NPV = 0. It represents the annualized return a project delivers. If IRR > your hurdle rate (cost of capital), the project creates value and should be accepted.
How do you calculate IRR?
IRR cannot be solved algebraically — it requires iterative numerical methods. This calculator uses Newton-Raphson with bisection fallback. You set up the equation 0 = CF₀ + CF₁/(1+r) + ... + CFₙ/(1+r)ⁿ and solve for r.
What is a good IRR?
It depends on your hurdle rate. IRR > 20% is excellent for most corporate projects; 15–20% is strong; 10–15% is acceptable. Private equity targets 20–25%+. The key test is always whether IRR exceeds your specific cost of capital.
What is the difference between IRR and NPV?
NPV gives the absolute dollar value added at a specific discount rate. IRR gives the rate the project actually delivers. NPV is better for comparing mutually exclusive projects; IRR is best for a go/no-go decision on a single project.
FINISHED THE NUMBERS?
A calculator gives you one number. The report gives you the argument.
Understand whether a company's capital allocation history suggests it earns above its cost of capital — with ROIC trend, free cash flow conversion, and peer benchmarks — on any public company.
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