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IRR Calculator
Use this free IRR calculator to estimate the internal rate of return on an investment based on an initial outflow and a stream of future cash flows. It is built for searches like IRR calculator, investment IRR calculator, and internal rate of return calculator.
Interactive calculator
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Estimated IRR
18.65%
Total Cash Returned
$180,000
Cash Multiple
1.80×
Years Modeled
5
When to use IRR
IRR is useful when cash comes back unevenly over time and you want an annualized return estimate to compare with a hurdle rate or alternative investment.
How the math works
Formula
0 = CF₀ + CF₁/(1+r) + CF₂/(1+r)² + … + CFₙ/(1+r)ⁿ
- rIRR — the rate that makes the equation equal zero
- CF₀Initial outflow (negative — the money you invest today)
- CF₁…nCash flows received in each future period
- nNumber of periods
Plain English
IRR is the breakeven return rate of an investment. If it exceeds your cost of capital, the project creates value. Investing $100,000 today to receive $30,000/year for 5 years yields an IRR of about 15.2%. If your cost of capital is 8%, this deal looks attractive. IRR has no closed-form solution — the calculator finds it iteratively using Newton's method.
How to use this calculator
- 1
Enter the initial investment as a starting amount and add projected annual cash flows for future years.
- 2
Review the estimated internal rate of return and total cash returned.
- 3
Adjust exit proceeds or annual cash flows to test downside and upside cases.
Why this number matters
IRR is useful when you want a single annualized return estimate for a project, private investment, business acquisition, or real estate deal. It helps compare opportunities that have different timing and sizes of future cash flows.
What this calculator helps you answer
- •What is the annualized return on a project with uneven cash flows?
- •How does a private investment compare with a public-market return target?
- •Does a business or real estate deal meet my hurdle rate?
Frequently asked questions
What does IRR mean?+
IRR is the discount rate that makes the net present value of all cash flows equal to zero. In practice, it is often used as a shorthand annualized return for an investment or project.
Why can IRR be misleading?+
IRR can overstate attractiveness when interim cash flows are unrealistic to reinvest at the same rate, and it can be less intuitive than comparing actual dollars created alongside NPV.
When should I use IRR instead of a simple ROI?+
Use IRR when timing matters. Two investments can have the same total ROI but very different annualized returns depending on how quickly the cash comes back.
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