IRR Calculator

How to use the IRR calculator

List your cash flows in order, starting with the initial investment at time 0. Money you pay out is negative and money you receive is positive — for example -10000, 3000, 4200, 6800 means you invest 10,000 today and receive 3,000, 4,200 and 6,800 over the next three periods. Choose whether the periods are years, quarters or months; the calculator annualizes quarterly and monthly results automatically. Enter a reinvestment rate to get the modified IRR (MIRR) as well.

The results show the IRR, MIRR, the total net cash flow and the payback period. The table discounts each cash flow at the IRR, so you can confirm that they add up to zero.

The IRR formula

The internal rate of return is the discount rate that makes the net present value of all cash flows exactly zero:

There is no algebraic solution for more than a few periods, so IRR is found numerically — this calculator uses a bisection search accurate to many decimal places. The modified IRR fixes two weaknesses of IRR by compounding positive flows at a realistic reinvestment rate and discounting negative ones at a finance rate:

Worked example

For the cash flows −10,000, 3,000, 4,200 and 6,800, the IRR is about 16.34%. Check: 3,000 ÷ 1.1634 + 4,200 ÷ 1.1634² + 6,800 ÷ 1.1634³ ≈ 2,579 + 3,103 + 4,318 ≈ 10,000, which cancels the initial outlay. With an 8% reinvestment rate, the MIRR is lower, at about 14.05%, because the interim cash flows are assumed to earn 8% rather than 16%. Payback happens after about 2.4 years, when cumulative cash flow turns positive.

How to interpret IRR

• Compare IRR with your hurdle rate — your cost of capital or the return you could get elsewhere at similar risk. If IRR exceeds it, the investment adds value.
• IRR ignores scale. A 40% IRR on 1,000 creates less wealth than a 15% IRR on 1,000,000. When choosing between projects, rank them by NPV too.
• IRR assumes reinvestment at the IRR. A very high IRR implies interim cash can be reinvested at that same high rate, which is rarely realistic. MIRR is more conservative.
• Multiple sign changes (e.g. −, +, −) can produce more than one IRR or none. The calculator warns you when this happens.

Where IRR is used

IRR is the standard return measure for private equity and venture capital funds, real estate deals, capital budgeting and comparing loans or leases. Investors also use it to measure their personal returns when they made deposits and withdrawals at different times — something simple ROI cannot handle. For a single deposit and single payout, IRR is the same as CAGR.

IRR vs XIRR

This calculator assumes equally spaced cash flows. Spreadsheet XIRR functions accept exact dates for each flow. If your flows are irregular, use the period that best fits or approximate with monthly periods and zeros where nothing happens.

Results are for analysis and education; they are not investment advice.