IRR Calculator
This IRR calculator finds the internal rate of return for an investment — the discount rate at which the investment exactly breaks even in present-value terms — from up to 5 years of cash flows. Enter your initial investment and expected yearly returns to see the IRR.
The upfront amount invested — entered as a positive number, treated as an outflow.
Net cash received in year 1 — 0 if none.
Net cash received in year 2.
Net cash received in year 3.
Net cash received in year 4.
Net cash received in year 5 — 0 if the project ends earlier.
Internal rate of return (IRR)
17.82%
How to use this irr calculator
- 1Initial investment: the upfront amount, entered as a positive number.
- 2Year 1-5 cash flows: the net cash you expect to receive each year — enter 0 for any year with no cash flow or if the investment period is shorter than 5 years.
Understanding your results
IRR is the annualized rate of return the investment effectively delivers, given its exact timing of cash inflows and outflows — the standard way to compare investments (or projects) with different cash flow patterns on a like-for-like basis. Total net profit is the simple undiscounted sum, useful context alongside IRR, which accounts for the time value of money.
The formula
IRR is the rate where NPV of all cash flows equals zeroIRR is found by testing discount rates until the net present value of every cash flow (the initial investment as a negative, each year's inflow as positive, all discounted back to today) sums to zero. There's no simple algebraic formula for this — it's solved numerically, which is exactly what this calculator does behind the scenes.
A worked example
A $100,000 initial investment returning $25,000, $30,000, $35,000, $35,000 and $40,000 over 5 years (totaling $165,000, a $65,000 undiscounted profit) has an IRR in the high teens — reflecting that most of the return comes in the earlier-to-middle years, which the time-value-of-money calculation rewards more than if the same total arrived mostly in year 5.
Notes for the UK, US and India
IRR is widely used to compare investment opportunities, but it has known limitations — it can produce misleading or multiple results for cash flow patterns with sign changes beyond the initial investment (e.g. a large cash outflow required partway through), and it implicitly assumes reinvestment at the IRR itself, which isn't always realistic. For those cases, comparing NPV at a realistic discount rate is often more reliable.
Frequently asked questions
What counts as a 'good' IRR?+
It depends entirely on your alternative options — a good IRR is one that beats your realistic alternative use of the same capital (your 'cost of capital' or opportunity cost), not a fixed universal number.
What if my project has more than 5 years of cash flows?+
Combine later years into the year-5 slot as a lump sum (with a note that this simplifies the true timing), or use a spreadsheet's IRR function directly for a project with a longer, more granular cash flow schedule.
Why might IRR and NPV give conflicting answers when comparing two projects?+
IRR is a rate (percentage), while NPV is a dollar amount — a smaller project can have a higher IRR but a lower NPV than a larger one. When comparing projects of different sizes, NPV is generally considered the more reliable decision metric.
Related calculators
Related articles
Business Margin Explained: Gross vs. Net Profit, Formulas, and What It All Actually Means
Business Finance
What Is Earning Margin? A Plain-English Guide to Profit
Business Finance
What Is Profit Margin? The Plain-English Guide for Business Owners
Business Finance
Product Margin: How to Calculate It and Why Your Pricing Might Be Leaking Profit
Business Finance