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IRR Calculator

Calculate the Internal Rate of Return — the discount rate at which an investment's NPV equals zero — to evaluate and compare projects.

Initial investment ($)

Hurdle rate / WACC (%) optional

Used to evaluate if IRR exceeds required return.

Annual cash flows ($)

Year 1

Year 2

Year 3

Year 4

Year 5

Enter initial investment.

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Everyday Uses

Real return on investments

Cash flowed in and out at different times? IRR gives the true annualized return of the whole journey.

Business deal screening

Compare a deal's IRR to your cost of capital to see if it clears the bar.

Property flips

Purchase, renovation costs, and sale proceeds — IRR condenses a flip into one comparable number.

Angel investing

Evaluate startup returns where money goes in early and comes back years later.

Where IRR misleads

It quietly assumes returned cash is reinvested at the same rate, which is rarely true, and it can produce several valid answers when cash flows switch between negative and positive more than once.

Rate against amount

A 40% return on a small project and 12% on a large one are not directly comparable. IRR ranks by rate and NPV by money, which is why serious analysis uses both.

Frequently Asked Questions

What is the Internal Rate of Return (IRR)?

IRR is the discount rate that makes an investment's Net Present Value equal to zero. It represents the annualised percentage return a project is expected to generate. If a project has an IRR of 18% and your required return (hurdle rate) is 12%, the project is worth pursuing.

How do I use IRR to make investment decisions?

Accept a project if its IRR exceeds your required rate of return (hurdle rate) or cost of capital. Reject it if IRR < hurdle rate. When choosing between projects, a higher IRR is better — but also compare NPVs, since a larger project with a lower IRR may create more absolute value.

What is a good IRR for a real estate investment?

Real estate investors typically target an IRR of 12–20% for residential properties and 15–25%+ for value-add or development projects. Private equity buyout funds typically target 20–25%+ IRR. Venture capital targets 30–50%+ to account for high failure rates. Context and risk level matter enormously.

What is the difference between IRR and ROI?

ROI measures total percentage return without accounting for time — a 50% ROI over 1 year vs. 5 years are treated the same. IRR is an annualised rate that accounts for the timing of cash flows, making it far more useful for comparing multi-year investments. A 50% ROI over 5 years is only ~8.4% IRR.

Can IRR give misleading results?

Yes. Projects with non-conventional cash flows (multiple sign changes — positive to negative and back) can produce multiple IRRs or no real IRR. Also, IRR implicitly assumes reinvestment of cash flows at the IRR itself, which is often unrealistic. Use Modified IRR (MIRR) and NPV to cross-check results.