IRR Calculator
Calculate the internal rate of return for your investment cash flows.
Yearly Cash Flows
Net Present Value at Various Rates
| Discount Rate | Net Present Value (NPV) |
|---|
What is IRR?
The Internal Rate of Return (IRR) is the discount rate that makes the net present value (NPV) of all cash flows equal to zero. It is a key metric used to evaluate the profitability of investments and projects.
How to Use This Calculator
- Enter your initial investment as a negative number.
- Add yearly cash flows for each year of the investment.
- Click Calculate to find the IRR and see NPV at different discount rates.
Frequently Asked Questions
What does a positive IRR mean?
A positive IRR indicates that the investment is expected to generate returns greater than the cost of capital. The higher the IRR, the more profitable the investment.
Can IRR be negative?
Yes, a negative IRR means the investment is expected to lose money overall. This generally indicates the project should be rejected.
What is the difference between IRR and NPV?
NPV shows the absolute dollar value created by an investment at a specific discount rate. IRR is the rate at which NPV equals zero, representing the breakeven return.
When should I not use IRR?
IRR can be misleading for projects with unconventional cash flows or multiple sign changes. In such cases, NPV is a more reliable decision metric.