Finance

IRR Calculator (Internal Rate of Return)

Find the discount rate that makes NPV = 0 for a series of cash flows.

Initial Investment ($)

Enter as negative (cash outflow)

Year 1 Cash Flow ($)

Year 2 ($)

Year 3 ($)

Year 4 ($)

Year 5 ($)

IRR Definition:
NPV = Σ CF_t / (1+IRR)^t = 0
IRR is the rate that makes the net present value of all cash flows equal zero.
Accept if IRR > required return (hurdle rate)

Understanding IRR

IRR is the annualized effective return rate. If a project's IRR exceeds the company's cost of capital, it adds value. IRR is widely used in capital budgeting and private equity.