IRR calculator

What IRR means

The internal rate of return is the yearly rate an investment earns, taking into account when each cash flow happens. Formally, it is the discount rate at which the net present value of all the flows is exactly zero. If a project's IRR is higher than your required return, it is worth doing.

Worked examples

Invest $10,000 and receive $3,000, $4,200 and $6,800 over three years: the IRR is 16.34%. Discounting those flows at 16.34% gives an NPV of exactly zero.

Buy a bond for $1,000 that pays $100 a year for three years and returns $1,000 at the end: the flows −1,000, 100, 100, 1,100 have an IRR of exactly 10%, the bond's yield.

Things to watch

• Sign changes: flows that switch between negative and positive more than once (for example a big repair in the middle) can have several IRRs.
• Scale: a small project with a high IRR may add less value than a big one with a lower IRR; check NPV too.
• Periods: the IRR is per period. With monthly flows, compound it to a yearly rate: (1 + IRR)^12 − 1.

There is no closed formula for IRR, so the page solves it numerically. It evaluates the NPV of your flows at rates from −99.99% upward until the NPV changes sign, then halves the interval repeatedly (bisection) until the NPV is within 10⁻¹⁰ of zero. The first line is treated as time 0. Everything runs in your browser.