Business calculators
IRR Calculator
Find the annual return rate that makes an investment's cash flows break even. Your inputs stay in this browser.
Live calculator
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What this calculator measures
Internal rate of return (IRR) is the annual return rate at which an investment's cash flows exactly break even in present-value terms — the rate where the net present value of the investment is zero.
This calculator assumes an equal cash flow every year, which fits investments like a fixed-payout rental or a level-return contract. Real investments with uneven year-to-year cash flows will not match this model exactly.
Formula
Inputs and variables
- Initial investment
- Enter the money amount used by this formula.
- Annual cash flow
- Assumed equal every year. Real cash flows can vary — see the limits below.
- Number of years
- Enter the value used by this formula.
- Terminal or resale value
- Any lump sum received in the final year, on top of the annual cash flow. This input is optional.
How to use the calculator
- Choose a display currency when money fields are present.
- Enter values that cover the same period, scope, and currency.
- Review the result, formula, and worked example before using the estimate in a decision.
- Change one assumption at a time to understand what drives the result.
Worked example
- 1An investment of $10,000 returns $3,000 a year for 5 years, with no terminal value.
- 2Solving for the rate that makes the discounted cash flows equal the investment gives an IRR of about 15.24%.
How to interpret the result
An IRR above your required rate of return (or cost of capital) suggests the investment clears your bar; below it suggests the investment does not, all else equal.
Common mistakes and limits
- Assuming real-world uneven cash flows are level, comparing IRRs from projects of very different sizes without also checking NPV, or treating IRR as a guarantee rather than a modeled estimate.
Frequently asked questions
Why does IRR need to be solved numerically?
There is no algebraic formula that isolates the rate directly when cash flows span multiple years, so the calculator searches for the rate that balances the equation.
What if my cash flows are not equal each year?
This calculator will not model that accurately. It is built for level annual cash flows only.
How is IRR different from ROI?
ROI compares total return to cost in one step. IRR accounts for when cash flows arrive, so it reflects the time value of money.