IRR Calculator
Estimate Internal Rate of Return (IRR) percentage for capital investments and cash flow projects.
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Return on the Cash Flows
The return that accounts for when money moved
Internal rate of return is the discount rate at which an investment's net present value comes to zero — in plainer terms, the annualised return that reconciles every cash flow in and out. Unlike simple ROI it accounts for timing, which is why it is the standard measure for anything with irregular contributions and withdrawals: property, private investments, capital projects.
Timing changes the answer even when the totals do not. Two investments can return the identical total on the identical outlay and have very different IRRs, because money returned earlier can be reinvested sooner. That is the entire point of the measure, and it is what makes it more honest than a headline percentage for anything lasting more than a year.
Three cautions. IRR assumes interim cash flows are reinvested at the IRR itself, which is optimistic for high figures — MIRR exists to fix exactly that. A stream that changes sign more than once can produce multiple mathematically valid IRRs, at which point the number stops meaning anything useful. And IRR is a rate, not an amount: a 40% return on a small outlay can be worth far less in money than 12% on a large one, so read it alongside NPV rather than instead of it.
Frequently asked questions
What is Internal Rate of Return (IRR)?
IRR is the discount rate that makes the net present value (NPV) of all cash flows from a project equal to zero.
What is internal rate of return?
The discount rate at which a project's net present value equals zero - effectively the annualised return the cash flows imply. It is compared against a hurdle rate or cost of capital: an IRR above it suggests the project creates value.
What are the limitations of IRR?
It assumes interim cash flows are reinvested at the IRR itself, which is unrealistic for high-IRR projects. Cash flow streams that change sign more than once can have multiple mathematically valid IRRs. And IRR ignores scale - a 60% return on $1,000 beats 20% on $1 million by IRR but not in dollars.
How does MIRR differ from IRR?
Modified IRR assumes interim cash flows are reinvested at the cost of capital rather than at the IRR, which is far more realistic, and it produces a single unambiguous answer even with alternating cash flow signs. Where IRR and MIRR diverge sharply, MIRR is usually the more honest figure.