MetricKitMetricKitBrowse calculators

IRR Calculator

Estimate internal rate of return (IRR) for an investment using yearly cash flows.

IRR (Internal Rate of Return) is the discount rate that makes NPV equal zero. It is a common way to compare investments when cash flows span multiple years.

IRR can be misleading when cash flows change sign multiple times, so use NPV alongside IRR for decision-making.

Prefer an explanation- Read the guide.
Related definitions:irrnpvdiscount ratemarr
IRR (Internal Rate of Return): definition, formula, and how to use itNPV vs IRR: which metric to trust (and the traps)Capital budgeting hub: NPV, IRR, payback, and investment decisionsInvestment decision metrics: NPV vs IRR vs payback vs PI
 
$
 
$
 
$
 
$
 
$
 
$
 
$
 
%
Tip: you can type commas (e.g., 10,000).

Example

Using the default inputs, the result is:
19.71%
Initial investment (upfront)
$100,000
Cash flow (year 1)
$25,000
Cash flow (year 2)
$30,000
Cash flow (year 3)
$35,000
Cash flow (year 4)
$40,000
Cash flow (year 5)
$45,000
Terminal value (optional, year 5)
$0
Discount rate (for NPV check)
12%

How to calculate

  1. Enter the upfront investment (cash outflow).
  2. Enter expected annual cash flows for years 1-5.
  3. Optionally include a terminal value in year 5.
  4. Calculate IRR and compare to your required return (MARR).

Formula

IRR is the rate r such that NPV(r) = 0
  • Cash flows are annual and occur at the end of each year (except the upfront investment at t=0).
  • IRR may not exist or may be non-unique for some cash flow patterns.

FAQ

IRR vs NPV: which should I use-
Use NPV for decisions at a chosen required return (MARR) because it measures value created in dollars. Use IRR to compare opportunities when capital is constrained, but validate with NPV to avoid misleading results.
Why might IRR be undefined or weird-
If cash flows change sign multiple times, the NPV curve can cross zero multiple times (multiple IRRs) or not at all. In those cases, rely on NPV instead.

Common mistakes

  • Multiple IRRs can exist when cash flows change sign multiple times.
  • IRR can hide scale (a small project can have high IRR but low NPV).
  • Use consistent periods (annual vs monthly) to avoid unit mismatch.

Related calculators

Finance
Deferred Revenue Rollforward Calculator
Bridge billings to recognized revenue by rolling deferred revenue forward for a period.
Finance
Break-even Revenue Calculator
Estimate the revenue needed to break even given fixed costs and gross margin.
Finance
NPV Calculator
Calculate net present value (NPV) from initial investment, annual cash flow, years, and discount rate.
Finance
Discounted Payback Period Calculator
Estimate discounted payback period using a discount rate (and compare to simple payback).
Finance
Cash Runway Calculator
Estimate runway from cash balance, revenue, gross margin, and operating expenses (optionally with revenue growth).
Finance
Break-even Pricing Calculator
Compute contribution margin, break-even units, and profit at a given volume based on price and variable costs.

Quick checks

  • Use consistent time units (monthly vs annual) when entering rates and cash flows.
  • Run a sensitivity check on the input that drives the result most (often discount rate or growth).
  • Treat the output as a decision aid, not a prediction; validate assumptions with reality.