Initial Investment
Yearly Cash Inflows
Cash Flow Analysis
Cumulative Cash Flow
| Period | Cash Flow | Cumulative | Present Value |
|---|---|---|---|
| Initial | -$100,000 | -$100,000 | -$100,000 |
| Year 1 | $25,000 | -$75,000 | $22,727 |
| Year 2 | $30,000 | -$45,000 | $24,793 |
| Year 3 | $35,000 | -$10,000 | $26,296 |
| Year 4 | $40,000 | $30,000 | $27,321 |
| Year 5 | $45,000 | $75,000 | $27,941 |
Investment Assessment
✓ Investment is Attractive
IRR (19.71%) exceeds your required return (10%). The investment creates value.
IRR vs Market Benchmarks
- S&P 500 average: ~10% ✓
- Real estate avg: ~7-8% ✓
- Bonds avg: ~4-5% ✓
Value Created
$29,079
Net Present Value at 10% discount
Investment Analysis
IRR
19.71%
Internal Rate of Return
NPV
$29,079
at 10% discount rate
What if I required a different return?
See how your hurdle rate affects investment attractiveness
Personalized Insights
3 insights based on your inputs
Investment Creates Value
IRR of 19.7% exceeds your 10% hurdle rate. This project should be accepted—it generates returns above your cost of capital.
Exceptional Return
19.7% IRR significantly outperforms typical investments. Verify assumptions—this may indicate higher risk.
IRR Limitations
IRR assumes reinvestment at the IRR rate. For more accurate analysis, consider Modified IRR (MIRR) or use NPV as the primary decision metric.
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Frequently Asked Questions
What is Internal Rate of Return (IRR)?
IRR is the discount rate that makes the NPV of all cash flows equal to zero. It represents the annualized effective compound return rate of an investment. Higher IRR = better investment. IRR above your required return rate indicates a good investment.
How does IRR differ from ROI?
ROI measures total return as a percentage of investment but ignores timing. IRR accounts for when cash flows occur (time value of money). A project returning $100k over 3 years has different IRR than one returning $100k over 10 years, even with same ROI.
What is a good IRR?
Good IRR depends on context. Generally: >15% is excellent, 10-15% is good, 5-10% is acceptable. Compare to alternatives: stock market averages ~10%, bonds ~4-5%, savings ~4%. Factor in risk - riskier investments should have higher required IRR.
What are IRR limitations?
IRR assumes cash flows are reinvested at the IRR rate (often unrealistic). Multiple IRRs can exist with non-conventional cash flows. IRR ignores project size - a small project with 50% IRR may be worse than a large one with 20% IRR. Use with NPV for full picture.
How do I interpret NPV with IRR?
NPV is the total value created in today's dollars. Positive NPV = investment adds value. Use discount rate equal to your cost of capital or required return. If IRR > discount rate, NPV will be positive. NPV tells you how much value; IRR tells you the rate.
How this works
Calculations are run entirely in your browser. No inputs are sent to our servers and no account is required. Formulas follow standard US definitions from the IRS and the CFPB where applicable; international users should confirm local tax and regulatory rules apply.
What this tool can’t do
When to consult a professional
This is a software engineering tool, not financial advice. Run the math here, then take the result to a certified financial planner, CPA, or your bank before making a decision that materially affects your money.
Sources
- [1]Consumer Financial Protection Bureau (CFPB)Official sourceconsumerfinance.govAccessed Apr 21, 2026
US consumer finance regulator; authoritative on mortgage disclosures, APR rules, credit cards.
Full-stack software engineer specializing in embedded systems, web architecture, and AI/ML. Founder of Practical Web Tools. Built the gesture-controlled drone IP acquired by KD Interactive (Aura Drone, sold on Amazon).