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IRR calculator

List the cash flows – the investment as a negative number, then the returns for each period – and the IRR calculator finds the internal rate of return. It also shows the net present value at your discount rate, the modified IRR and how long it takes to get your money back.

Source: OpenStax Principles of Finance, 16.2 Net Present Value (NPV) Method (Rice University). Updated: .

outflows negative, inflows positive; semicolons also work
% per year
your required return or cost of capital; also used as reinvestment rate for MIRR
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Result

IRR (annual)
15.32%
Net present value (NPV)
1,646.35
Modified IRR (MIRR)
12.19%
Payback period
2.6 years
Discounted payback period
2.96 years
Verdict
NPV ≥ 0: the project returns at least 8%.
Present values by period
PeriodCash flowPresent valueCumulativeCumulative discounted
0-10,000.00-10,000.00-10,000.00-10,000.00
13,000.002,777.78-7,000.00-7,222.22
24,000.003,429.36-3,000.00-3,792.87
35,000.003,969.162,000.00176.29
42,000.001,470.064,000.001,646.35
Estimate only, not investment or financial advice.

How it is calculated

IRR and NPV formula

NPV = Σ CFt ÷ (1 + r)t: each cash flow is discounted to today at rate r and summed. The internal rate of return is the rate that makes NPV exactly zero. There is no closed formula; the calculator solves it numerically and warns when there is more than one solution.

Example

A machine costs 10,000 and returns 3,000, 4,000, 5,000 and 2,000 over four years. At an 8% discount rate:

YearCash flowPresent value at 8%Cumulative
0−10,000−10,000.00−10,000.00
13,0002,777.78−7,222.22
24,0003,429.36−3,792.87
35,0003,969.16176.29
42,0001,470.061,646.35

NPV is 1,646.35, so the IRR (15.32%) is above the 8% hurdle. Payback takes 2.6 years, discounted payback just under 3 years.

MIRR

IRR assumes returns are reinvested at the IRR itself. The modified IRR reinvests them at your discount rate: MIRR = (future value of inflows ÷ present value of outflows)1/n − 1 – here 12.19% instead of 15.32%.

In Excel

=IRR(A1:A5) gives the IRR, =NPV(8%,A2:A5)+A1 the NPV (Excel’s NPV discounts from the first value, so add the initial investment separately), =MIRR(A1:A5,8%,8%) the MIRR. For irregular dates use XIRR. For real estate, include the purchase with closing costs at period 0 and the sale proceeds in the last period.

Frequently asked questions

How do you calculate IRR?

Find the discount rate at which the net present value of all cash flows is zero. By hand this means trial and error; the calculator and Excel’s IRR function solve it numerically.

What is a good IRR?

One that beats your cost of capital or the return you could get elsewhere at similar risk. If IRR is above your discount rate, NPV is positive.

What is the difference between IRR and NPV?

NPV is a money amount at a given discount rate; IRR is the rate at which NPV is zero. For choosing between projects of different size, NPV is the more reliable guide.

How do I calculate monthly IRR?

Enter monthly cash flows and choose “monthly”. The calculator shows the monthly IRR and annualizes it as (1 + monthly IRR)12 − 1.

Why can there be more than one IRR?

When cash flows change sign more than once – for example a large cleanup cost at the end – the NPV equation can have several roots. Use NPV or MIRR in that case.

Sources and legal basis

As of:

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