Internal Rate of Return (IRR) Calculator

Calculate the internal rate of return for your investment based on initial investment and cash flows.

Calculator

Enter Your Investment Details

Enter the initial investment amount.

Enter the cash flows for each period (positive for inflows, negative for outflows).

Table of Contents

1 IRR Formula
2 How to Calculate IRR
3 IRR - Practical Examples
Concept

IRR Formula

The Internal Rate of Return (IRR) is the discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero. It's used to evaluate the attractiveness of a project or investment.

Formula:
NPV = 0 = -Initial Investment + Σ(CFt / (1 + IRR)^t)

Where:

  • NPV = Net Present Value
  • CFt = Cash Flow at time t
  • IRR = Internal Rate of Return
  • t = Time period
Steps

How to Calculate IRR

To calculate IRR, follow these steps:

  1. 1
    Determine your initial investment amount
  2. 2
    List all expected cash flows for each period
  3. 3
    Use trial and error or financial calculator to find the discount rate that makes NPV = 0
Examples

IRR - Practical Examples

Example 1 Simple Investment

Initial investment: $10,000
Year 1 cash flow: $3,000
Year 2 cash flow: $4,000
Year 3 cash flow: $5,000

IRR ≈ 15.1%

Example 2 Longer-term Investment

Initial investment: $50,000
Year 1-5 cash flows: $12,000 each year

IRR ≈ 6.4%

Example 3 High-risk Investment

Initial investment: $100,000
Year 1 cash flow: $20,000
Year 2 cash flow: $30,000
Year 3 cash flow: $80,000

IRR ≈ 22.3%

Tools

Financial Calculators

Vat Car Depreciation Future Value Discounted Cash Flow Present Value

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