IRR Calculator

Calculate the Internal Rate of Return for any series of cash flows to evaluate investment profitability.

Investment Details

1 yr30 yrs
Formula: ROI = (Net Profit / Cost) × 100
ROI = (35,000 / 1,00,000) × 100 = 35%

Return on Investment

+35%

Net Profit / Loss

+₹35,000

Annualized ROI (CAGR)

10.52%/yr

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IRR Calculator Formula & How It Works

NPV = Σ [Cₜ / (1 + IRR)ᵗ] = 0 (solve for IRR)
  • Cₜ = Cash flow at time t (negative for outflows, positive for inflows)
  • IRR = rate that makes NPV equal to zero
  • Solution requires iterative numerical methods (Newton-Raphson)
  • Accept project if IRR > Hurdle Rate (required rate of return)

IRR is the discount rate that makes the Net Present Value of all cash flows equal to zero. It represents the effective annual return rate of an investment. Accept a project if IRR > your required rate of return (hurdle rate). IRR is widely used in capital budgeting, real estate, and venture capital.

IRR Calculator FAQs

What is a good IRR for a project?

IRR must exceed the hurdle rate (minimum required return). Typical hurdles: 10–15% for established businesses, 20–30% for venture capital. Real estate projects commonly target 12–20% IRR. The higher the IRR, the more profitable the project.

What is the difference between IRR and ROI?

IRR accounts for the time value of money and the timing of cash flows. ROI is simpler — just (Net Return / Cost). A project with irregular cash flows over multiple years requires IRR for accurate evaluation; ROI ignores when money is received.

What are the limitations of IRR?

IRR assumes reinvestment at the IRR rate (often unrealistic). Multiple IRRs can exist for projects with sign-changing cash flows. NPV is generally more reliable for choosing between mutually exclusive projects. Use MIRR (Modified IRR) to address reinvestment assumption.

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