Calculate your investment's profitability with our free, easy-to-use IRR calculator
Select "Regular IRR" for varying cash flows or "Fixed IRR" for equal cash flows.
Input your initial investment and cash flow information.
Specify period length and principal repayment option.
Click "Calculate IRR" and evaluate the result.
The Internal Rate of Return (IRR) is a financial metric used to estimate the profitability of potential investments. It represents the discount rate that makes the net present value (NPV) of all cash flows equal to zero in a discounted cash flow analysis.
In simpler terms, IRR is the annualized effective compounded return rate which can be expected from an investment. It's expressed as a percentage and helps investors compare different investment opportunities.
The IRR is calculated by finding the discount rate (r) that satisfies the following equation:
This formula sets the Net Present Value (NPV) of cash flows to zero and solves for the discount rate (r), which is the IRR.
Let's say you're considering an investment that requires an initial outlay of $10,000 and is expected to generate the following cash flows:
| Year | Cash Flow |
|---|---|
| 0 | -$10,000 |
| 1 | $3,000 |
| 2 | $4,000 |
| 3 | $5,000 |
| 4 | $6,000 |
Using our calculator above, the IRR for this investment is 14.49%. This means the investment is expected to generate an annualized return of 14.49%.
A "good" IRR depends on the industry, risk level, and opportunity cost of capital. Generally, an IRR that exceeds the company's cost of capital or hurdle rate is considered acceptable. For example, if a company's cost of capital is 10%, an IRR of 13% would be favorable.
Return on Investment (ROI) measures total growth from start to finish without considering time periods, while IRR accounts for the time value of money and provides an annualized rate of return. IRR is more precise for evaluating long-term investments.
Yes, a negative IRR indicates that the investment is expected to lose money. This happens when the total cash inflows are less than the initial investment.
NPV is generally preferred for comparing projects of different sizes because it shows absolute dollar value. IRR is useful for comparing projects of similar size or when communicating results to stakeholders who prefer percentages.
Regular IRR is used when cash flows vary from period to period. Fixed IRR is used when the same cash flow amount is received in each period (annuity). Fixed IRR is simpler to calculate and is common in cases like bond investments or equal annual dividends.
When using custom period lengths, the IRR calculation gives a rate for that specific period. To make it comparable to annual rates, we annualize it using the formula: (1 + period_rate)^(12/months_per_period) - 1. This allows you to compare investments with different cash flow frequencies.
This option is for investments where only interest payments are made during the term, with the full principal repaid at the end (like bonds). If checked, the calculator automatically adds the principal as a final cash flow. If your cash flows already include principal repayments, leave this unchecked.
A negative IRR indicates that your investment is expected to lose money. This can happen for several reasons:
Example: If you invest $10,000 and only receive $8,000 in total returns over several years, your IRR will be negative, indicating a loss.
To calculate IRR manually, you need to solve for the discount rate that makes the net present value (NPV) of all cash flows equal to zero. Our free online IRR calculator simplifies this complex calculation. For manual calculations, you can use the formula: NPV = Σ [Ct / (1 + r)^t] = 0, where Ct is the cash flow at time t and r is the IRR. You can calculate IRR using our free calculator tool above, or by using financial calculators, Excel (using the IRR function), or manual calculations for simple cash flows. The easiest method is to use our online IRR calculator which provides instant results. IRR is calculated by finding the discount rate that sets the Net Present Value (NPV) of cash flows to zero. The mathematical formula is: NPV = Σ [Ct / (1 + r)^t] = 0. This requires iterative calculations which our calculator performs automatically.
To calculate IRR in Excel, use the =IRR() function. Simply enter your cash flows in a column (with initial investment as a negative value) and use the formula =IRR(range_of_cash_flows). For more complex scenarios, you can use the =XIRR() function for irregular cash flows. Make sure to include the initial investment as the first value in your cash flow series. This is the same method as our how to calculate IRR in Excel guide, but specifically focused on the Excel application. For irr calculation in Excel, this method is widely used by financial professionals.
Calcul irr (Internal Rate of Return calculation) is a financial method used to evaluate the profitability of investments. Our irr calculator tool helps you determine the rate of return for a series of cash flows. The calcul irr is essential for investment analysis and decision making. When calculating irr or doing an irr calculation, this approach provides valuable insights into investment performance.
To calculate IRR on a financial calculator, you need to input all cash flows including the initial investment (as a negative value) and then use the IRR or CF (Cash Flow) function. The exact steps vary by calculator model, but generally involve: 1) Clearing previous cash flows, 2) Entering the initial investment, 3) Entering subsequent cash flows, 4) Computing the IRR. Finding IRR on financial calculators typically involves using the cash flow (CF) function. Enter all cash flows including the initial investment, then use the IRR computation function. Most financial calculators have a dedicated IRR button or it's accessed through the cash flow menu. Refer to your calculator's manual for specific key sequences.
To calculate IRR on a BA II Plus financial calculator: 1) Press CF to enter cash flow mode, 2) Clear previous data with 2nd CLR WORK, 3) Enter initial investment as a negative value using +/- key, 4) Enter subsequent cash flows, 5) Press IRR then CPT to compute the result. This specialized calculator is widely used by finance professionals for IRR calculations and other financial computations.