See what annual return rate a project implies from its cash inflows and outflows — and whether it clears your required return (for example your cost of capital).
Purpose: you evaluate an investment or project in percent per year — what return is implied by the cash flows you enter. How to read it: IRR is the rate that sets NPV to 0; compare it with your required return. Periods are full years. Payback measures recovery time, not a rate. With several sign changes in the cash flows, IRR can be ambiguous — then decide with NPV.
Enter the initial investment and each year’s cash flow, then Calculate. The main result is IRR — the project’s annual rate.
What question does IRR answer? What annual rate of return does this cash-flow series imply? You enter an outlay up front and inflows (or further outflows) in later years — the calculator finds the rate at which the net present value of those amounts is zero.
Definition: IRR is the annual rate r such that NPV = Σ CFt ÷ (1 + r)t = 0. We solve it numerically (Newton’s method, then bisection if needed).
Required return (optional) is your hurdle — e.g. cost of capital. When you enter it, you also see whether IRR clears it, discounted payback at that rate, and NPV at the required return (a short money view next to the percent result).
Simple payback is the first year when cumulative undiscounted cash flows reach zero or above. That is a time metric, not a rate — it does not replace IRR or NPV.
Limits: IRR does not show investment scale. With multiple sign changes the NPV = 0 root may not be unique — lean on NPV for the decision.
IRR ≈ 17.09%
Required return: 8%
Simple payback: after year 3
Discounted payback @ 8%: after year 4
IRR clears the 8% required return. Payback figures speak to recovery time — not IRR substitutes. NPV at 8% shows in the result cards.
IRR ≈ 9.42%
Required return: 10%
IRR (≈ 9.42%) stays below the 10% required return — the project misses that percentage bar; NPV at 10% will be negative.
IRR ≈ 4.54%
Required return: 12%
The negative year-2 flow adds another sign change — a cue that IRR may not be unique; check full NPV.
Multiple-sign-change warning
One numerical IRR root is shown
Interleaved inflows and outflows can leave more than one NPV = 0 root. Decide with NPV, not IRR alone.
With multiple sign changes in the cash flows, do not decide on IRR alone — check NPV.
It finds the IRR — the annual rate of return implied by your cash-flow series (investment today, inflows and outflows in later years). You can then compare that rate with a required return, such as your cost of capital. It evaluates a project in percent terms; it is not a stock-market forecast.
IRR is the annual rate that sets the NPV of your cash flows to zero — a break-even point in percent. If you get about 17%, the model says that at a 17% discount rate the project breaks even. It is not a guaranteed investment return.
NPV answers: how much value in money remains at a chosen discount rate. IRR flips the question: what rate drives NPV to zero. Compute both — IRR does not show scale in currency (a small project can still post a high IRR).
The required return is your hurdle (cost of capital, target return). If IRR is higher, the project clears that percentage bar; if lower, it misses it. At the same rate we also show NPV in money, so you see both views.
When cash flows change sign more than once (for example an extra outlay mid-horizon), the NPV = 0 equation can have several roots or none that make sense. The calculator warns in that case — prefer NPV for decisions.
It does not show project scale. A small project can post a very high IRR with little absolute value. NPV better measures value created in currency.
Not in this version — full years only (year 0, 1, 2…). Shorter periods are a later scope; for now enter yearly cash flows.
Numerically: Newton’s method first, then bisection over a realistic rate range if Newton does not converge.
NPV at your actual discount rate (full NPV calculator) and the NPV-at-required-return card if you enter one. For a single future amount, PV is enough.
IRR is the project rate (when NPV = 0). Simple payback is the time until cumulative cash flows return to zero without discounting. Discounted payback appears only with a required return and does the same after discounting. None of these metrics replaces the others.
