IRR (Internal Rate of Return) is the discount rate that makes the net present value of all cash flows equal to zero. It is the annualized return an investment earns on the money still invested.

How is IRR different from ROI?

ROI is a simple total return without timing. IRR accounts for when cash flows arrive, so it is better for comparing investments with different timelines.

Internal Rate of Return Calculator

Model an investment with steady annual cash flows.

Cash Flow Details

Initial Investment ($)

Annual Cash Flow ($)

Number of Years

yrs

Residual / Salvage Value ($)

Internal Rate of Return (IRR)

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Total Cash Inflows

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Total Nominal Profit

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How IRR is computed

IRR finds the rate r where NPV = −Investment + Σ Cash Flow ÷ (1+r)^year + Residual ÷ (1+r)^years = 0. The calculator solves this equation numerically. If no positive rate makes the equation balance, the result shows N/A — the cash flows are not enough to recover the investment.

IRR FAQ

What is a good IRR?▶

Compare IRR to your required rate of return or the cost of capital. In India, projects with an IRR above 12-15% are generally considered attractive, but it depends on risk.

Can IRR be negative?▶

Yes, if the cash flows fail to return the initial investment over time. A negative IRR means the project loses money even before considering inflation.

IRR: Internal Rate of Return

Meaning: Rate where NPV = 0

Use: Compare business projects

Decision: Accept if IRR > cost of capital

IRR Calculator — the rate that makes an investment worth it

The Internal Rate of Return (IRR) is the discount rate at which a project's future cash flows exactly offset its initial investment (NPV = 0). It's the gold standard for evaluating business projects and large investments — this calculator solves it numerically in the browser.

Understanding IRR

IRR is the implied annual return of a series of cash flows: an initial outflow followed by inflows.

Decision rule: accept a project if IRR exceeds your cost of capital (e.g. 12%). Reject if IRR < hurdle rate.

For the example of a $10,00,000 investment returning $2,50,000/year for 5 years plus a $2,00,000 residual, IRR ≈ 12.3%.

IRR vs NPV vs payback

NPV tells you the absolute value created (in money) at your discount rate; IRR tells you the percentage return.

IRR alone can mislead when projects have different scales — a 50% IRR on $10,000 produces far less absolute wealth than 20% IRR on $1,000,000.

Payback period is the simplest but ignores profitability after breakeven — use all three for big decisions.

How to use this calculator

Enter the initial investment (negative cash flow).
Enter the annual cash flow expected each year.
Set the number of years.
Optionally add a residual/salvage value at the end.
Read the IRR percentage and total cash inflows.

Pro tips

Compare IRR against your true cost of capital, not a random benchmark.
For real estate, include rental income, tax benefits and resale value as cash flows.
When comparing two projects, prioritize NPV at your hurdle rate.

Frequently asked questions

What is a good IRR?▶

A 'good' IRR is one above your cost of capital. For most businesses, 15–25% is strong; 8–12% is moderate for stable real estate and infrastructure projects.

What if IRR is negative?▶

A negative IRR means the project loses money in present-value terms — the cash flows don't recover the initial investment at any positive discount rate. Reject it.

IRR Calculator