IRR Calculator

About the IRR Calculator

Internal Rate of Return (IRR) is the discount rate that makes the Net Present Value (NPV) of all cash flows from an investment equal to zero — in practical terms, it's the annualized effective rate of return you earn on a project or investment. IRR is the standard metric for comparing capital investments and is widely used in private equity, venture capital, real estate, and corporate finance.

How It Works

IRR is found iteratively — there's no closed-form formula. The calculator tests different discount rates until it finds the one where NPV = 0. Enter your initial investment as a negative cash flow (year 0), then the expected annual returns as positive cash flows. For a $100,000 investment returning $30,000/year for 5 years, the IRR is approximately 15.2%. Compare this to your cost of capital (WACC) — if IRR > WACC, the investment creates value.

Tips & Best Practices

• ✓IRR above your required rate of return (hurdle rate) indicates a value-creating investment.
• ✓Typical IRR targets: PE funds target 20–25%; real estate operators 15–20%; corporate projects 15%.
• ✓Modified IRR (MIRR) addresses the reinvestment assumption limitation of standard IRR.
• ✓Multiple IRRs can occur with unconventional cash flow patterns (positive then negative).
• ✓IRR alone is insufficient — always consider NPV, payback period, and qualitative factors.

Who Uses This Calculator

Private equity analysts, real estate syndicators, CFOs evaluating capital budgets, and startup investors calculating exit returns all use IRR as a primary investment evaluation metric.