ReturnLab

IRR Calculator

The single rate of return implied by a project's own cash flows — compare it directly against your required hurdle rate.

Cash flows (period 0 first, comma-separated)

First value is the initial investment — usually negative

Internal rate of return

23.27%

What you entered

Cash flows: -$10,000, $3,000, $4,200, $5,100, $4,800

1
Search for the discount rate where NPV = 0
NPV(r) = Σ CFₜ ÷ (1 + r)ᵗ = 0= 23.27%

Result

Internal rate of return: 23.27%

This series of cash flows breaks even at a 23.27% discount rate — that's the IRR. Compare it to your required return: if IRR beats your hurdle rate, the investment clears the bar.

Internal rate of return on a $10,000 investment

Each row is $10,000 invested up front followed by five equal annual returns of the amount shown. IRR is the discount rate at which those inflows exactly repay the outlay, so NPV is zero.

Annual inflow	Total received	Multiple of outlay	IRR
$2,000	$10,000	1.00x	0.00%
$2,500	$12,500	1.25x	7.93%
$3,000	$15,000	1.50x	15.24%
$3,500	$17,500	1.75x	22.11%
$4,000	$20,000	2.00x	28.65%

Compare the multiple against the IRR: doubling your money over five years is a 28.65% annual return, while getting 1.25 times back is only 7.93% - the multiple flatters slow returns and IRR does not, which is why it is the fairer comparison. IRR is a rate, so it ignores scale: a small project with a high IRR can be worth less in absolute money than a large one with a lower IRR, and NPV is the better tie-breaker there. Two mathematical cautions - a cash flow series that changes sign more than once can have several valid IRRs, and IRR implicitly assumes interim cash is reinvested at the same rate, which is often optimistic.

IRR vs. NPV

NPV gives you a dollar amount at a rate you choose; IRR flips the question and solves for the rate itself. Use IRR to compare projects of different sizes on a percentage-return basis.

A limitation to know

IRR assumes cash flows are reinvested at the IRR itself, which isn't always realistic for very high IRRs. For a more conservative comparison, pair IRR with an NPV calculation at your actual expected reinvestment rate.

How to use IRR for investment decisions

Calculate the project's IRR, then compare it to your hurdle rate (minimum acceptable return, usually your cost of capital). If IRR > hurdle rate, the project adds value. If IRR < hurdle rate, reject it. A real estate deal with 14% IRR beats a hurdle rate of 10%, but a project with 7% IRR when your WACC is 9% destroys value.

Frequently asked questions

What is a good IRR?

It depends on the investment type and risk. Real estate: 10-15% is solid, 20%+ is excellent. Private equity: 15-25%. Venture capital: 25-35%+ to compensate for high failure rates. Public stocks: 8-12%. Always compare IRR against your cost of capital — any IRR above that threshold creates value.

What is the difference between IRR and ROI?

ROI is a simple total return percentage (gain ÷ investment). IRR is an annualized rate that accounts for the timing of cash flows. A project returning $150K on a $100K investment has 50% ROI — but if that takes 5 years, the IRR is about 8.4%. IRR is more useful for comparing investments with different time horizons.

Can IRR be negative?

Yes — a negative IRR means the project loses money. If you invest $100K and get back $80K total over several years, the IRR is negative because no positive discount rate can make the NPV zero. A negative IRR is a clear signal to reject the project.