IRR Calculator
Calculate the Internal Rate of Return (IRR), Net Present Value (NPV), and payback period for an investment with up to 6 years of cash flows.
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How to use this calculator
IRR is the discount rate (r) that makes NPV equal to zero. Found by scanning NPV for a sign change and bisecting. I = initial investment, CF = cash flow per period.
- 1
Enter the initial investment amount (the upfront cost, as a positive number).
- 2
Enter the expected cash inflows for each year — enter 0 for years with no cash flow.
- 3
The calculator solves for IRR iteratively and also shows payback period and simple ROI.
- 4
Compare the IRR against your required rate of return (hurdle rate) — invest if IRR > hurdle rate.
Frequently asked questions
What exactly does the tool solve?
It finds the rate r where −Initial + CF₁/(1 + r) + CF₂/(1 + r)² + … + CF₆/(1 + r)⁶ = 0. Rather than guessing and iterating from a starting point, this tool scans NPV from −99% to +10,000% for a change of sign and then bisects that interval, so the rate it reports does satisfy the equation, and NPV at that rate is shown as a check.
How should I enter the cash flows?
Enter the initial investment as a positive number; the tool treats it as an outflow at time 0. Enter inflows as positive and any later outflow as negative. All flows are placed at year ends, one year apart, with up to six years. Use 0 for years with nothing, and trailing zeros are harmless.
Why does it say IRR is n/a?
IRR only exists when the cash flows change sign at least once, meaning an outflow and an inflow. If the initial investment is 1,000 and the only later flow is −3,000, or if nothing comes back at all, NPV never crosses zero at any rate, and the tool reports n/a rather than a made-up number.
Can there be more than one IRR?
Yes, when the flows change sign more than once. An outlay of 1,000 followed by +5,000 and then −6,000 has two roots, and the tool shows the lowest one, 100.00%, together with a note that more than one exists. When that note appears, judge the project with NPV at a rate you choose and not with IRR alone.
Is the answer a percentage per year?
Yes. The cash flows are annual, so the IRR is an annual effective rate, shown as a percentage. A negative IRR is possible: a 10,000 outlay returning 1,000 in each of two years gives −62.98%, meaning the money is not recovered in the period entered.
How are payback period and the gain figures calculated?
Payback is the first point at which cumulative, undiscounted cash flow turns non-negative, with a straight-line fraction inside that year. Net Gain / Loss is every later flow, positive and negative, added together minus the initial investment. Total Cash Inflows counts the positive flows only. Simple ROI is net gain ÷ initial investment, and shows n/a if the initial investment is 0.
What does IRR assume about the money that comes back?
The IRR equation discounts every flow at the same rate, which is equivalent to assuming that interim cash can be reinvested at the IRR itself. If that is unrealistic for your case, the headline rate can look better than what you would realise. The tool does not include tax, fees or inflation, and its output is an illustration from your inputs, not advice.
Internal rate of return from up to six annual cash flows
The rate that makes NPV zero
IRR is not given by a formula you can rearrange, so the calculator searches for it. It evaluates NPV across a wide band of rates, looks for where the sign flips from positive to negative, and narrows that interval by repeated halving. The result is the discount rate at which the present value of the inflows exactly equals the initial outlay.
Worked example: the default project
An outlay of 10,000 followed by 2,000, 3,000, 4,000, 4,000 and 3,000 gives an IRR of 16.60%. Payback is 3.3 years, total inflows are $16,000.00, net gain is $6,000.00 and simple ROI is 60.00%. Note how different the two percentages are: ROI ignores timing, so it reports the same 60% whether the money arrives early or late, whereas IRR rewards earlier flows.
Several cash-flow shapes side by side
The table shows how the shape of the cash flows changes the outputs. A single payoff after five years has an IRR identical to a growth rate over those years, while a later outflow lowers net gain without changing the sign pattern. The last row shows what a loss looks like.
| Outlay and flows | IRR | Payback | Net gain / loss |
|---|---|---|---|
| 10,000; 2,000, 3,000, 4,000, 4,000, 3,000 | 16.60% | 3.3 years | $6,000.00 |
| 1,000; 400, 400, 400 | 9.70% | 2.5 years | $200.00 |
| 5,000; 0, 0, 0, 0, 8,000 | 9.86% | 4.6 years | $3,000.00 |
| 10,000; −1,000, 5,000, 5,000, 5,000, 5,000 | 19.84% | 3.2 years | $9,000.00 |
| 10,000; 1,000, 1,000 | −62.98% | Not recovered | −$8,000.00 |
When IRR is unreliable
Two situations need care. If the flows never change sign, there is no IRR, and the tool says so. If they change sign more than once, the equation can have several roots; with 1,000 out, then +5,000, then −6,000, the lowest root is 100.00% and the tool adds a note. In both cases NPV at a rate you select is the safer yardstick.
Using the figure responsibly
IRR is a way to summarise a set of projected flows as a single rate, which can then be set against whatever return you require. It says nothing about whether the projections are realistic, and it leaves out tax, charges and inflation. The numbers here are illustrations from the inputs you provide, not forecasts. Changing one year’s flow and re-reading the rate shows how sensitive the result is to a single assumption, and the note row appears automatically whenever the sign pattern allows more than one answer.
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Results are estimates for informational purposes only and do not constitute professional financial, medical, legal, or technical advice. Read full disclaimer →