Calculate IRR, NPV, and payback period for investments
The Internal Rate of Return (IRR) calculator determines the annualized rate of return that makes the net present value of all cash flows equal to zero. It is an essential tool for evaluating and comparing investment projects and capital budgeting decisions.
IRR is widely used by financial analysts, real estate investors, and business owners to assess the profitability of potential investments. By accounting for the timing and magnitude of all cash flows, IRR provides a single percentage figure that can be compared across different investment opportunities.
Use this calculator to evaluate projects, real estate deals, or business investments. Enter your initial investment and projected cash flows to see the IRR, NPV at a 10% discount rate, and payback period — three critical metrics for informed investment decision-making.
IRR is the discount rate that solves the equation NPV = 0. The calculator uses the Newton-Raphson method to iteratively find this rate. NPV is the sum of all cash flows discounted at a given rate.
A good IRR depends on the cost of capital and risk profile of the investment. Generally, an IRR higher than the company's cost of capital indicates the project adds value and should be accepted.
IRR gives the rate of return as a percentage, while NPV gives the dollar value added by the project. NPV is generally considered more reliable for comparing mutually exclusive projects of different sizes.
Yes, IRR can be negative if the total undiscounted cash inflows are less than the initial investment. A negative IRR means the investment loses money, and the project should typically be rejected.
Modified IRR (MIRR) addresses some limitations of traditional IRR by assuming reinvestment at the cost of capital rather than at the IRR itself. MIRR typically provides a more realistic picture of a project's true profitability.
IRR assumes all cash flows are reinvested at the same rate, which may not be realistic. It can also produce multiple IRR values when cash flows change signs more than once, making interpretation difficult.