What is IRR (Internal Rate of Return)?

IRR is the discount rate that makes the Net Present Value (NPV) of all cash flows equal to zero. It represents the expected annualized return on an investment. For example, an IRR of 15% means the investment is expected to return 15% annually over its lifetime.

What is a good IRR for an investment?

Good IRR depends on context: Private equity targets 20-25%+, real estate projects 10-20%, corporate capital projects 8-15% (above WACC), and venture capital may target 30-40%+ due to high risk. Always compare to opportunity cost and risk-adjusted alternatives.

How is IRR different from ROI?

ROI (Return on Investment) is a simple percentage gain: (Final - Initial)/Initial. IRR accounts for the time value of money and timing of cash flows. IRR is an annualized rate, while ROI is total return regardless of time period. Use IRR for comparing investments with different time horizons.

What are the limitations of IRR?

IRR assumes reinvestment at the same rate (often unrealistic), can give multiple values for non-conventional cash flows, and ignores project scale. Modified IRR (MIRR) addresses some of these issues. Always use IRR alongside NPV for investment decisions.

How do I calculate IRR by hand?

IRR requires iterative calculation: guess a rate, calculate NPV, adjust until NPV = 0. Formula: 0 = Σ[CF_t / (1+IRR)^t] for all periods t. In practice, use a financial calculator, Excel's IRR() function, or our online calculator for accurate results.

IRR Calculator – Internal Rate of Return & NPV Tool

IRR Calculator

Calculate internal rate of return (IRR) for capital projects, real estate, and private equity investments. Build a cash flow timeline, compute IRR, and review net present value (NPV) at a 10% discount rate.

100% FreeInvestment AnalysisCash Flow Modeling

Cash Flow Inputs

Enter initial investment (negative) and annual net cash flows.

Initial investment (Year 0)

Use negative values for investments/outflows and positive for returns/inflows.

Year 1 cash flow

Year 2 cash flow

Year 3 cash flow

Year 4 cash flow

Year 5 cash flow

How to use this IRR calculator

Enter initial investment as a negative number and add projected cash inflows for each year. Click “Calculate IRR” to see internal rate of return and NPV metrics.

Trusted Resources

Learn more about IRR and investment analysis from authoritative sources:

Investopedia: IRR Guide

In-depth IRR explanation

CFI: IRR Tutorial

Professional finance training

SEC: Investment Guide

Official investing fundamentals

Frequently Asked Questions

IRR is the discount rate that makes NPV equal zero. It represents the expected annual return of an investment over its life. Higher IRR means better returns. Compare IRR to your cost of capital to evaluate investments.

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