The IRR Calculator finds the internal rate of return of an investment, either from a starting amount, regular deposits or withdrawals and an ending balance, or from a list of yearly cash flows.
IRR: 29.77%
| IRR (annual) | 29.77% |
| Rate per period | 2.1953% |
| Number of periods | 30 |
Enter the cash flow for each year, starting with year 1 (use negative numbers for money paid out).
IRR: 319.26%
| Internal rate of return | 319.26% |
| Total cash in | $80,000.00 |
| Total cash out | $10,000.00 |
The internal rate of return (IRR) is the discount rate that makes the net present value of all cash flows equal zero. In plain words, it is the yearly rate of return the investment earns, taking the timing of every payment into account. It lets you compare projects of different sizes and lengths.
There is no simple formula; IRR is found by trial: guess a rate, discount every cash flow, and adjust until the total is zero. This calculator does that automatically.
Worked example: paying 10,000 in year 1 and receiving 30,000 and 50,000 in years 2 and 3 gives a very high IRR because the returns are large compared with the outlay.
NPV gives a dollar value at a chosen discount rate and is better for comparing projects of different sizes. ROI ignores timing. Modified IRR (MIRR) fixes IRR's assumption that cash is reinvested at the IRR itself. Projects whose cash flows change sign more than once can have several IRRs.
What is a good IRR? One higher than your cost of capital or the return available elsewhere at similar risk.
Is IRR the same as CAGR? For a single investment and single payback, yes.
Why can IRR be misleading? It ignores project size and assumes reinvestment at the same rate.