IRR Calculator

What IRR Actually Measures

The internal rate of return is the discount rate that makes the net present value (NPV) of a series of cash flows equal to zero. In plain terms, it's the annualized growth rate an investment would need to deliver to turn your initial outlay into the exact stream of returns you entered — a single percentage that lets you compare very different-looking investments (a rental property, a business expansion, a stock position) on equal footing. This calculator treats the initial investment as a cash outflow at time zero and each year's entry, including the optional final salvage or exit value, as a cash inflow at the end of that year.

Why the Math Requires Guessing (and How We Solve It)

Unlike most financial formulas, IRR has no direct algebraic solution when there are three or more cash flows — the equation is a polynomial that generally must be solved by iteration. This calculator uses the Newton-Raphson method, repeatedly refining a rate estimate until the resulting NPV lands essentially at zero. If your cash flows never turn positive, or all of them are positive, no real IRR exists and the calculator will tell you so rather than returning a misleading number.

IRR Has Limits — Pair It With NPV

IRR assumes any interim cash flows are reinvested at the same IRR rate, which can overstate returns on projects with big early payouts, and it can also produce multiple valid answers when cash flows switch sign more than once. Because of this, most finance professionals treat IRR as a supporting metric rather than the sole decision criterion. The Net Present Value at 0% row above shows your simple, undiscounted total return, and if you want to test how the project performs at your own required rate of return rather than solving for a break-even rate, the present value calculator lets you discount future cash flows at a rate you choose. For evaluating straightforward return on a single investment, the ROI calculator is also a useful complement.