Enter an initial investment and yearly cash flows to find the internal rate of return.
How irr is worked out
The internal rate of return is the discount rate that makes an investment’s net present value zero — a single annualized yield for uneven cash flows. Enter the initial outflow and each year’s cash flow.
It’s widely used to compare projects and investments.
How to use it
- Enter the initial investment.
- Add each year’s cash flow.
- Read the IRR.
The formula
IRR is the rate where
−investment + Σ (cashflowₜ ÷ (1+IRR)ᵗ) = 0
A worked example
Worked through, a initial investment of 10,000 produces a IRR of 8.9%. Underneath, Net profit comes out at $2,000 and Total inflows at $12,000. Change any field and every figure updates as you type.
Common questions
What is IRR?
The annualized return that sets the net present value of all cash flows to zero — a project’s effective yield.
How do I compare projects with IRR?
Generally a higher IRR is better, but it assumes reinvestment at the IRR and can mislead with unusual cash-flow patterns.
What’s a good IRR?
It depends on your required return and risk. Compare against your hurdle rate. This is an estimate, not advice.