IRR Calculator

The internal rate of return is the discount rate that makes an investment's net present value exactly zero. It is the break-even rate the project must beat, and it lets you compare projects of different sizes on a single percentage scale.

Initial investmentCash spent at time zero.Annual cash flowCash received each year.YearsNumber of years the cash flow continues.Required return(%)Hurdle rate for the accept or reject decision.

Internal rate of return

0.00%

Annuity factor: 3.3333
Total cash received: $15,000.00
Total profit: $5,000.00
NPV at required return: $1,372.36

Values update as you type. This calculator covers the single scenario its formula assumes — see Common Mistakes for what it leaves out.

The formula this calculator uses

NPV = 0 at the rate r, so r is the IRR

C0: Initial investment at time zero
CF: Cash received each year
n: Number of years
IRR: Rate that makes NPV zero

How to check the result by hand

1
Lay out the cash flows
List the initial cost as a negative at year zero and each year's inflow as a positive. Timing matters, so be precise about which year each flow falls in.
2
Compute the cost-to-cash ratio
Divide the initial cost by the annual cash flow. 10,000 divided by 3,000 gives 3.333, the annuity factor for five years.
3
Search for the matching rate
Find the rate whose five-year annuity factor equals 3.333. Trial rates converge quickly, or a spreadsheet's IRR function solves it directly.
4
Compare with your hurdle rate
If the IRR exceeds the return you require, accept the project. If it falls short, the project destroys value at your cost of capital.
5
Check the NPV too
Confirm the NPV at your required rate is positive for the same cash flows. When scale differs, trust the NPV, not the IRR.

For worked examples, common mistakes and the limits of this formula, read the full How To Calculate IRR page.