The IRR Calculator computes the internal rate of return (IRR) of an investment. Use the first calculator for a fixed cash flow with regular deposits or withdrawals, or the second for a series of irregular yearly cash flows.
For an investment with a starting amount, a final value, and regular periodic deposits or withdrawals.
For an investment with an initial amount followed by different cash flows each year (enter negative values for further investments).
The IRR calculator computes the internal rate of return - the single most widely used metric for judging the profitability of an investment over time. IRR is the annualized rate of return that makes the net present value (NPV) of all cash flows from an investment equal to zero. In plain terms, it is the effective compound interest rate the investment earns each year, accounting for exactly when money goes in and comes out. This calculator offers two ways to find it: one for a fixed cash flow with regular periodic deposits or withdrawals, and one for a series of irregular cash flows that differ from year to year.
Because IRR incorporates the timing and size of every cash flow, it is far more informative than a simple total-return percentage. It lets you compare very different investments - a rental property, a business project, a stock position, a bond - on a single, consistent annualized basis.
The internal rate of return is the discount rate at which the present value of an investment's expected cash inflows exactly equals the present value of its cash outflows. Equivalently, it is the rate that makes the net present value of all cash flows zero. The "internal" in the name means the calculation depends only on the investment's own cash flows, not on any external rate such as inflation or a market benchmark.
Conceptually, IRR answers the question: "What constant annual growth rate would turn my outflows into my inflows, given the exact dates they occur?" An investment is generally considered worthwhile when its IRR exceeds the investor's required rate of return (often called the hurdle rate or cost of capital).
IRR is the value of r that solves the net present value equation:
NPV = Σ [ Ct ÷ (1 + r)t ] = 0
Where Ct is the cash flow at time t (negative for money invested, positive for money received) and r is the internal rate of return. Because this equation cannot generally be solved with algebra, IRR is found through iteration - the calculator repeatedly tries rates until it finds the one that drives NPV to zero. This calculator uses a reliable numerical method to converge on the exact rate.
Example (irregular cash flow): Suppose you invest $50,000 today, invest a further $10,000 at the end of year 1, then receive $30,000 at the end of year 2 and $50,000 at the end of year 3. The cash flow series is −50,000, −10,000, +30,000, +50,000. The IRR that sets the NPV of this series to zero is 12.446% per year.
Example (fixed cash flow): If you invest $10,000, withdraw $100 at the end of every month for 2 years and 6 months, and end with $15,000, the calculator builds the monthly cash flow series, finds the monthly IRR, and annualizes it to 29.768% per year.
Use this version when your investment has a clear starting amount, an ending value, and a regular, repeating cash flow in between - such as a fixed monthly withdrawal from an annuity or a recurring contribution. You provide the initial investment, the holding period (in years and months), the final amount, the size and frequency of the periodic deposit or withdrawal, and whether those occur at the beginning or end of each period. The calculator constructs the full cash flow timeline, solves for the per-period IRR, and annualizes it.
It also reports your cumulative deposits or withdrawals, your total return in dollars, and your gross (non-annualized) return as a percentage, so you can see both the headline IRR and the underlying totals.
Use this version when the cash flows vary from period to period, which is the most common real-world situation. You enter the initial investment and then each year's cash flow individually - positive for money received, negative for additional money invested. Add as many years as your investment spans. The calculator finds the annual IRR of the entire series along with your total further investments, the investment length, and the total and gross returns.
IRR is expressed as an annual percentage, which makes it intuitive: a 15% IRR means the investment effectively grows at 15% per year, compounding, after accounting for the timing of all cash flows. To judge whether an IRR is "good," compare it to your required rate of return:
When choosing among several investments, a higher IRR is usually preferable, but IRR should not be the only factor - scale, risk, and the reinvestment of interim cash flows all matter.
Return on investment (ROI) measures the total percentage gain over the entire holding period without regard to timing, while IRR is an annualized rate that fully accounts for when each cash flow occurs. ROI is simpler but can be misleading: a 100% ROI earned over one year is vastly better than a 100% ROI earned over ten years, yet ROI reports them identically. IRR captures that difference. For investments with a single inflow and outflow, an annualized ROI and IRR agree; for investments with multiple cash flows over time, IRR is the more accurate measure.
IRR and net present value are closely related - IRR is the discount rate at which NPV equals zero. NPV tells you the dollar value an investment adds at a specific discount rate, while IRR tells you the rate itself. The two usually agree on whether to accept a single investment, but they can disagree when ranking mutually exclusive projects of different sizes or with very different cash flow patterns. In those cases, NPV is generally considered the more reliable decision criterion because it measures absolute value created, whereas IRR can favor smaller projects with high percentage returns over larger ones that create more total wealth.
While powerful, IRR has important limitations that every investor should understand:
For these reasons, experienced analysts use IRR alongside NPV and other measures rather than relying on it alone.
There is no universal threshold - a good IRR is one that exceeds your required rate of return for the risk involved. In corporate finance, projects are accepted when the IRR is above the cost of capital. For higher-risk investments like venture capital, investors expect much higher IRRs to compensate for the risk.
ROI is the total percentage return over the whole holding period and ignores timing. IRR is an annualized rate that accounts for exactly when each cash flow happens. IRR is more accurate for investments with multiple cash flows spread over time.
Yes. A negative IRR means the investment loses money - the cash you receive is worth less than the cash you put in, even before discounting. The calculator will report a negative rate when that is the case.
When cash flows change sign more than once (for example, outflow, then inflow, then outflow), the NPV equation can have multiple roots, so several rates technically satisfy it. In such cases IRR is ambiguous, and NPV or MIRR is a better decision tool.
The calculator first finds the IRR per period (for example, per month), then annualizes it by compounding: annual IRR = (1 + periodic IRR)^(periods per year) − 1. This converts a monthly rate into an equivalent yearly rate.
The modified internal rate of return (MIRR) is a variation that assumes interim cash flows are reinvested at a specified reinvestment rate rather than at the IRR itself. It addresses one of IRR's main weaknesses and often gives a more realistic picture of an investment's return.