IRR Calculator
Find the internal rate of return on an investment's cash flows — the discount rate at which net present value equals zero — with an optional hurdle-rate comparison.
Results from this calculator are estimates provided for general informational purposes only, based on formulas, rates, and standards commonly accepted as of 2026. Figures may differ slightly from other calculators or professional sources due to rounding methods, differing assumptions, or regional regulations, and rules may change over time. Always consult a qualified professional — such as a financial advisor, healthcare provider, or other relevant specialist — before making decisions based on these results.
Internal Rate of Return
10.56%
Vs. 10% Hurdle Rate
Clears hurdle
NPV at 10%: $523
Example
An initial investment of $40,000 with the entered cash flows produces an internal rate of return of 10.56%. Since the IRR is above your 10% hurdle rate, this project clears your required return, with an NPV at the hurdle rate of $523.
NPV profile — where the curve crosses zero is the IRR
What is an IRR Calculator?
The internal rate of return (IRR) is the discount rate at which the net present value (NPV) of a project's cash flows equals zero — the break-even annual return an investment delivers once the time value of money is accounted for. If a project's IRR exceeds your required rate of return (hurdle rate), it's typically considered a good use of capital.
Because algebraic solutions rarely exist for real cash-flow streams, IRR is found with iterative numerical methods. This calculator solves it directly from an initial investment and up to six years of cash flow, and plots the full NPV profile so you can see exactly where the curve crosses zero.
Year-by-Year Cash Flow
| Year | Cash Flow | Discounted at IRR | Cumulative |
|---|---|---|---|
| 0 | -$40,000 | -$40,000 | -$40,000 |
| 1 | $10,000 | $9,045 | -$30,000 |
| 2 | $12,000 | $9,817 | -$18,000 |
| 3 | $15,000 | $11,099 | -$3,000 |
| 4 | $15,000 | $10,039 | $12,000 |
| 5 | $0 | $0 | $12,000 |
| 6 | $0 | $0 | $12,000 |
How IRR Is Calculated
IRR is the rate r that solves the net present value equation for zero, where CFt is the cash flow in period t:
This calculator solves for r numerically using bisection: it repeatedly narrows a range of candidate rates until the resulting NPV is within a tiny fraction of zero.
IRR vs. NPV
IRR and NPV are complementary. NPV tells you the dollar value a project creates at a given discount rate; IRR tells you the specific discount rate where that dollar value is exactly zero. IRR is popular because it lets you compare projects without first committing to an assumed discount rate — you can simply check whether the IRR clears your hurdle rate.
Limitations of IRR
IRR is scale-blind: a small project with a very high IRR can create far less total value than a larger project with a modestly lower IRR. It also implicitly assumes interim cash flows are reinvested at the IRR itself, which is often unrealistic, and it ignores the uncertainty behind the projected cash flows entirely. Cash flows that flip sign more than once (cost, then income, then cost again) can also produce more than one mathematically valid IRR — this calculator reports the first root found by bisection across a -99% to 1,000% search range.
Example — Your Current Inputs
An initial investment of $40,000 with the entered cash flows produces an internal rate of return of 10.56%. Since the IRR is above your 10% hurdle rate, this project clears your required return, with an NPV at the hurdle rate of $523.
Additional Example — Equipment Purchase
A $40,000 machine is expected to generate $10,000, $20,000, and $30,000 in years 1 through 3. Solving the NPV equation for zero gives an IRR of about 19.4% — a strong return if the company's cost of capital is below that rate.
About These Parameters
- Initial Investment
- The upfront cash cost of the project — equipment purchase, project capital, or acquisition price — treated as a single cash outflow at time zero.
- Annual Cash Flow (Years 1-6)
- The net cash the investment generates each year. Cash flows don't need to be equal — enter your best estimate for each year, and set later years to 0 if the project has a shorter life than six years.
- Hurdle Rate
- Optional. Your minimum acceptable rate of return, usually your cost of capital or a target return set by management. Used only to flag whether the computed IRR clears the bar and to show NPV at that rate.
Frequently Asked Questions
What counts as a "good" IRR?
There's no universal number — a good IRR is simply one that beats your hurdle rate (cost of capital or required return) by a comfortable margin, given the project's risk. Riskier projects generally need a higher IRR to be worthwhile.
Why does my project show no solvable IRR?
IRR requires at least one sign change in the cash flow stream — typically an outflow at time zero followed by inflows later. If every cash flow points the same direction (all costs or all income), there's no discount rate that makes NPV equal zero.
Should I choose the project with the higher IRR?
Not automatically. IRR ignores the scale of the investment — a $5,000 project with a 30% IRR creates far less value than a $500,000 project with a 15% IRR. Compare NPV alongside IRR when project sizes differ.
How is IRR different from ROI?
ROI measures total return relative to cost without regard to timing. IRR annualizes that return and accounts for exactly when each cash flow occurs, which is why two investments with the same total ROI can have very different IRRs if their cash flows arrive at different times.