Finance calculator
IRR Calculator - Internal Rate of Return
Estimate internal rate of return and NPV from an initial investment, annual cash flows, terminal value, and discount rate.
Formula0 = CF0 + CF1/(1+r)^1 + CF2/(1+r)^2 + ... + CFn/(1+r)^n
Formula
IRR equation
IRR can be misleading for unusual cash-flow patterns. Compare it with NPV, payback, risk, and scenario analysis before making capital decisions.
0 = CF0 + CF1/(1+r)^1 + CF2/(1+r)^2 + ... + CFn/(1+r)^n
An initial -50,000 followed by five yearly cash flows is solved for the rate r that makes NPV equal zero.
SourcesThis calculator includes source notes, assumptions, and exclusions so the result is easier to verify before use.
Sources and assumptions
Source notes
This calculator includes source notes, assumptions, and exclusions so the result is easier to verify before use.
- Effective year
- Current rules
- Last verified
- 2026-06-18
IRR can be misleading for unusual cash-flow patterns. Compare it with NPV, payback, risk, and scenario analysis before making capital decisions.
Assumptions
- Cash flows occur at equal yearly intervals.
- The initial investment occurs at year zero.
- Terminal value is added to the final year's cash flow.
Not included
- Irregular dates, reinvestment assumptions, taxes, financing costs, multiple-IRR diagnostics beyond the displayed warning, and audited valuation methods.
FAQ7 common questions for this calculator.
FAQs
What does IRR mean?+
IRR is the discount rate that makes the net present value of the entered cash flows equal to zero.
Why can there be no single IRR?+
If cash flows do not switch signs in a suitable way, or switch signs multiple times, a single clean IRR may not exist.
Should I use IRR or NPV?+
Use both when possible. IRR is a rate comparison, while NPV estimates value at your chosen discount rate.
How does the IRR Calculator calculate the result?+
For the IRR Calculator, it uses the IRR equation: 0 = CF0 + CF1/(1+r)^1 + CF2/(1+r)^2 + ... + CFn/(1+r)^n. An initial -50,000 followed by five yearly cash flows is solved for the rate r that makes NPV equal zero.
What information do I need to use the IRR Calculator?+
For the IRR Calculator, enter an initial investment, annual cash flows, terminal value, and discount rate. Keep the units consistent with the calculator fields and compare your setup with the worked example on the page.
How accurate is the IRR Calculator?+
IRR Calculator is accurate for the rates, amounts, dates, and rules entered. It uses the IRR equation shown on this page. Real products can differ because of fees, taxes, contract terms, or changing official thresholds.
What should I check before using the IRR Calculator result?+
For the IRR Calculator, check an initial investment, annual cash flows, terminal value, and discount rate, then compare the IRR equation and worked example with the contract or source you will rely on. Fees, tax year, currency, and payment timing can change the final decision.
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Finance guide
How to use the IRR Calculator
Estimate internal rate of return and NPV from an initial investment, annual cash flows, terminal value, and discount rate. The page also explains the IRR equation and shows a practical example: An initial -50,000 followed by five yearly cash flows is solved for the rate r that makes NPV equal zero.
- 1
Enter your details
Enter an initial investment, annual cash flows, terminal value, and discount rate, then complete any other fields shown in the calculator.
- 2
Check the calculation
Review the result alongside the IRR equation: 0 = CF0 + CF1/(1+r)^1 + CF2/(1+r)^2 + ... + CFn/(1+r)^n.
- 3
Compare scenarios
Change one or more inputs to see how they affect the IRR Calculator result before you use the estimate.