IRR Calculator
Calculate Internal Rate of Return for your investment cash flows
Initial Investment
-$100,000
$
Enter as negative for cash outflow (investment). Typically the first cash flow is negative.
Internal Rate of Return
0.00%
Total Cash In
$0
Total Cash Out
$0
Net Cash Flow
$0
Payback Period
–
Future Cash Flows (Annual)
Cumulative Cash Flow
Understanding IRR
What is IRR (Internal Rate of Return)?
IRR is the discount rate that makes the net present value (NPV) of all cash flows equal to zero. In simpler terms, it’s the annualized rate of return you can expect from an investment. A higher IRR indicates a more profitable investment.
How do I interpret IRR results?
Compare the IRR to your required rate of return (hurdle rate). If IRR exceeds your hurdle rate, the investment is considered acceptable. For example, if your IRR is 15% and your hurdle rate is 10%, the investment exceeds your minimum requirements.
What’s a good IRR?
A “good” IRR depends on your industry, risk profile, and alternatives. Generally, an IRR above 15-20% is considered strong for most investments. However, real estate might target 12-15%, while venture capital might seek 25%+ due to higher risk.
Why use negative numbers for investments?
Cash outflows (money you spend) are represented as negative numbers, while cash inflows (money you receive) are positive. This convention helps clearly distinguish between money going out versus coming in.
What are IRR limitations?
IRR assumes reinvestment at the same rate, which may be unrealistic. It can also produce multiple values for non-conventional cash flows (multiple sign changes). For comparing investments of different sizes, consider using NPV alongside IRR.