Calculation details
Planning estimate only, not financial, tax, or legal advice. Verify assumptions and current rules before making decisions.
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Use this result
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What does this calculator estimate?
Internal rate of return (IRR) is the annualized rate that makes the net present value of a project's cash flows zero — the return an investment earns on its cash flows. Enter your cash flows one per line (negative for outflows) to find the IRR.
- IRR = discount rate where NPV = 0
- Compare IRR to your cost of capital
- Cash flows must start with an outflow and change sign once
What IRR measures
IRR is the discount rate that makes the present value of inflows exactly offset the outflows. It's the project's implied annual return, letting you compare investments of different sizes and timings.
Limitations to watch for
IRR assumes cash flows are reinvested at the same IRR, which is often unrealistic. Projects with multiple sign changes can have multiple or no IRRs. IRR can rank projects differently than NPV when the investment sizes differ — NPV is the better decision rule when they conflict.
How to use it in practice
Accept a project if its IRR exceeds your required return or cost of capital. Use IRR with NPV, not instead of it, and prefer NPV when comparing mutually exclusive projects of different scale.
['Enter each cash flow on its own line: a negative number for the initial outlay, positives for inflows.', 'Use at least two cash flows.', 'The tool finds the rate that zeroes the NPV.']
How this calculator works
Formula
IRR is the discount rate r where the net present value of all cash flows equals zero: Σ cash_flow_t ÷ (1 + r)^t = 0. The tool solves for r by bisection between −99% and +1,000%.
Worked example
An investment of −$10,000 followed by $3,000 per year for 4 years has an IRR of about 7.71% — the rate at which those inflows discount back to exactly $10,000.
Assumptions to verify
- Cash flows occur at the end of each period.
- A single unique IRR exists (one sign change).
- Interim cash flows are reinvested at the computed IRR.
Frequently asked questions
What is IRR?
Internal rate of return is the discount rate at which the net present value of an investment's cash flows equals zero — the annualized return implied by those cash flows.
How is IRR different from NPV?
NPV gives a dollar value at your chosen discount rate; IRR gives a rate. Use NPV to compare projects and IRR to see whether a project clears your required return.
What is a good IRR?
One that exceeds your cost of capital or required return. For example, if borrowing costs 8%, a project at 10% adds value; at 6% it destroys value versus the cost of funds.
Why does the tool say no unique IRR?
IRR requires cash flows to start with an outflow and change sign only once. Multiple sign changes (like later negative years) can produce multiple IRRs or none.
Does IRR assume reinvestment?
Yes — it assumes interim cash flows are reinvested at the same IRR, which is often optimistic. Modified IRR (MIRR) is a more conservative alternative.
What cash flows should I enter?
The initial outlay as a negative number (e.g., -10000) and each expected inflow as a positive number, one per line, in period order.
Can IRR be negative?
Yes — if inflows never repay the outlay, the rate that zeroes the NPV is negative, meaning the project loses money.
Cite this tool
BoringToolsKit. “IRR Calculator.” boringtoolskit.com/irr-calculator/ (reviewed 2026-08-25). Free to reference in articles, syllabi, and answer posts with a link.
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