Irr Calculator
Calculate the Internal Rate of Return (IRR) for a series of cash flows. Input initial investment and periodic net cash flows to find the discount rate that makes net present value zero.
Published by:
isCalculator Editorial Team
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How to use this tool?
This guide explains how to use the IRR Calculator to compute the Internal Rate of Return for an investment.
- Enter Initial Investment – Input the initial cash outflow as a negative number (e.g.,
-1000). This represents money you invest upfront. - Enter Cash Flows – Type future cash inflows as comma-separated numbers (e.g.,
200,300,400,500). Do not include the initial investment here. - Set Initial Guess (optional) – Provide a starting estimate for the IRR (e.g.,
0.1for 10%). This helps the calculation converge faster. Leave as default if unsure. - Click "Calculate IRR" – The calculator uses Newton's method to find the discount rate that makes the Net Present Value (NPV) zero.
- Read the Result – The IRR is displayed as a percentage (e.g.,
12.34%). A higher IRR indicates a more profitable investment.
Note: If you see "N/A" or an error, try adjusting the guess or verifying your cash flows are realistic (e.g., at least one positive cash flow after the initial investment).
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Frequently Asked Questions
Internal Rate of Return (IRR) is the discount rate that makes the net present value (NPV) of all cash flows from a project equal to zero. It is used to evaluate the profitability of investments.
IRR is calculated using an iterative method like Newton's method. It finds the rate at which the sum of discounted cash flows equals the initial investment.
A negative IRR indicates that the investment is expected to lose money. The project's returns are less than the discount rate used, resulting in a negative net present value.
