How it works
Calculate the Internal Rate of Return (IRR) for a series of annual cash flows.
Input query strings and outputs
Use an input name in this page’s URL as ?name=value, and join additional inputs with &. Portable shared links may instead use the compact ?ac= state parameter.
Input query strings
2-
?initialInvestment=Initial InvestmentNumber · Optional · Default: 10,000
-
?cashFlows=Cash FlowsText · Optional · Default: 2000, 3000, 4000, 5000
Outputs
1-
resultResultText · Primary output
result contains the calculator’s complete rendered result area, including its visible result cards, tables, charts, and messages.
Solve for the Internal Rate of Return
Description
The IRR Calculator is a sophisticated financial tool used in capital budgeting and investment analysis. The Internal Rate of Return (IRR) is the “discount rate” that makes the Net Present Value of all cash flows (both positive and negative) from a particular project equal to zero. Essentially, it’s the effective interest rate earned by an investment over time.
Inputs
- Initial Investment: The amount of cash paid out at the start of the project (Year 0) ($).
- Annual Cash Flows: A comma-separated list of the cash returned (or paid out) at the end of each subsequent year ($).
- Example: 1000, 2000, 5000
Outputs
- Internal Rate of Return (IRR): The annualized percentage yield of the project.
- NPV (at 10% Discount Rate): The Net Present Value of the project assuming a standard 10% “cost of capital.” This shows if the project is “worth it” at that specific rate.
Chart
- N/A: This tool provides complex numeric solving for investment yield.
“Good to Know”
- Usually, if the IRR is higher than your “Cost of Capital” (the interest rate you pay on debt or the return you could get elsewhere), the investment is considered a “Go.”
- IRR is excellent for comparing two different projects: the one with the higher IRR is typically the more attractive option.
- This calculator uses an iterative search to find the IRR, as there is no simple formula for series with multiple years.
Examples
Example 1: Standard Venture
- Input:
- Initial: $10,000
- Flows:
2000, 3000, 4000, 5000
- Output:
- IRR: 11.59%
- NPV: $635 (Positive NPV at 10% confirms it’s a good deal).
Example 2: Rapid Return
- Input:
- Initial: $5,000
- Flows:
5000, 5000
- Output:
- IRR: 61.8%
- (High IRR due to getting the full investment back in the first year).
Example 3: Underperforming Project
- Input:
- Initial: $20,000
- Flows:
1000, 2000, 5000, 5000
- Output:
- IRR: -7.2%
- (Shows that the project returns less total cash than the initial investment).