IRR Calculator
Calculate the Internal Rate of Return (IRR) for an investment project to evaluate profitability.
Input Parameters
Results
Internal Rate of Return
IRR is the discount rate at which an investment's NPV equals zero. If IRR exceeds the required rate of return (hurdle rate), the investment is considered worthwhile. It is widely used for capital budgeting decisions.
What is the IRR Calculator?
The Internal Rate of Return (IRR) Calculator is a sophisticated corporate finance tool. It evaluates the profitability of complex investments that have uneven, changing cash flows occurring at different times over multiple years.
How It Works (Algorithm)
IRR is the specific discount rate ($r$) that forces the Net Present Value (NPV) of all cash flows to equal precisely zero. Because it cannot be solved with direct algebra, the calculator runs an iterative algorithm (like the Newton-Raphson method) to guess and verify the exact percentage.
$$ 0 = \sum_{t=1}^{n} \frac{C_t}{(1 + IRR)^t} - C_0 $$
The foundational equation for evaluating corporate capital projects.
How to Use It
Enter your initial upfront investment as a negative number (since it is cash leaving your pocket). Then, enter the expected cash returns for Year 1, Year 2, Year 3, etc. The tool will calculate the annualized percentage return of the entire project.