Calculate the Internal Rate of Return for a series of periodic cash flows. IRR is the discount rate that makes NPV = 0, used to evaluate and rank investment projects.
Cash Flow Series
Period 0 is initial investment (negative). Subsequent periods are returns.
💸 Periodic Cash Flows
$
$
$
$
$
%
Internal Rate of Return
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Decision
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IRR
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Hurdle Rate
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Total Invested
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Total Returns
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FAQ
What is IRR?
IRR (Internal Rate of Return) is the discount rate at which the Net Present Value (NPV) of all cash flows equals zero. It represents the annualized return rate of an investment project.
How to interpret IRR?
Compare IRR to your hurdle rate (minimum acceptable return or cost of capital). If IRR > hurdle rate → accept the investment. If IRR < hurdle rate → reject. Higher IRR = better investment.
What is the difference between IRR and NPV?
NPV expresses profit in dollar terms at a given discount rate. IRR expresses profitability as a percentage rate. They usually agree on accept/reject decisions. Use NPV when comparing projects of different sizes.
What are limitations of IRR?
IRR assumes cash flows are reinvested at the IRR itself — which may be unrealistic. For projects with multiple sign changes in cash flows, multiple IRRs may exist. In those cases, use Modified IRR (MIRR).