IRR Calculator

Calculate Internal Rate of Return (IRR) and Net Present Value (NPV) for investment analysis. Enter cash flows to evaluate project profitability.

Investment Analysis

IRR

19.71%

Internal Rate of Return

NPV

$29,079

at 10% discount rate

Initial Investment$100,000
Total Cash Inflows$175,000
Total Return75.0%
Payback Period3.3 years

Initial Investment

$
%

Yearly Cash Inflows

$
$
$
$
$

Cash Flow Analysis

Cumulative Cash Flow

PeriodCash FlowCumulativePresent 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

Initial Investment$100,000
Total Cash Inflows$175,000
Total Return75.0%
Payback Period3.3 years

Quick Answer

IRR (Internal Rate of Return) is the discount rate that makes the net present value (NPV) of all cash flows equal to zero. It represents the annualized rate of return for investments with irregular cash flows. Enter your initial investment and expected cash flows at practicalwebtools.com to calculate IRR instantly.

Key Facts

  • IRR is the rate where NPV = 0 (present value of inflows equals outflows)
  • Higher IRR generally indicates better investment
  • IRR allows comparison of projects with different sizes and durations
  • IRR assumes reinvestment at the IRR rate (a limitation)
  • Multiple IRRs possible with non-conventional cash flows
  • MIRR (Modified IRR) addresses reinvestment rate assumption
  • IRR should be compared to cost of capital or hurdle rate

Frequently Asked Questions

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.
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.
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.
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.
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.