Find the annual rate of return at which the NPV of your cash flows is zero, and compare it against a hurdle rate.
Version 1: yearly model — periods are full years. IRR is the project rate (NPV = 0), not a guaranteed outcome — solved numerically (Newton + bisection) and may be missing or non-unique with multiple sign changes. Payback / discounted payback are separate recovery-time helpers, not substitutes for IRR. Always cross-check with NPV.
Enter data and click Calculate.
IRR (internal rate of return) is the annual rate r for which NPV = Σ CFt ÷ (1 + r)^t = 0. The calculator searches for it numerically with Newton's method, falling back to bisection when that doesn't converge.
If you enter a hurdle rate, you'll see the gap in percentage points between IRR and that target — a positive gap means the project beats the required return.
IRR doesn't show the scale of an investment — a small project can show a very high IRR with little absolute value. Always cross-check it against NPV.
When cash flows change sign more than once, IRR can have multiple solutions or none at all — the calculator warns you in that case.
Simple payback is the first year when cumulative cash flows (undiscounted) return to zero or above — it measures recovery time, not a rate. Discounted payback appears only when you enter a hurdle: the same idea on cash flows discounted at the hurdle rate. IRR, payback, and DPB are three different metrics.
IRR ≈ 17.09%
Hurdle rate: 8%
Simple payback: after year 3
Discounted payback @ 8%: after year 4
IRR (the rate) clears the 8% hurdle. Payback is about cash recovery time; DPB measures that time after discounting — not substitutes for IRR.
IRR ≈ 9.42%
Hurdle rate: 10%
IRR (9.42%) stays below the 10% hurdle rate — the investment does not meet that threshold.
IRR ≈ 4.54%
Hurdle rate: 12%
The negative cash flow in year 2 is a second sign change in the series — a sign that IRR (here ≈ 4.54%) may not be unique; worth checking against the NPV calculator.
The annual rate of return at which the NPV of a series of cash flows equals zero — a profitability threshold expressed as a percentage.
NPV gives a currency result at a chosen rate. IRR flips the question: what rate makes NPV = 0. It is worth computing both together.
If IRR exceeds the hurdle rate, the investment beats the required minimum return; if it is lower, it fails that threshold.
When cash flows change sign more than once (e.g. an extra outlay mid-period), the NPV = 0 equation can have several solutions or none that make sense.
It does not show the currency scale of a project — a small project can have a high IRR but little absolute value. NPV better measures the value created.
Not in v1 — currently yearly periods only. An update with monthly periods is planned.
Numerically: first with Newton's method, and when that doesn't converge, with bisection over a realistic rate range.
With NPV at your actual discount rate, and with present value (PV) if you are analyzing only a single future amount.
IRR is the project rate (NPV = 0). Simple payback is the time until cumulative cash flows return to zero without discounting. Discounted payback (only with a hurdle) discounts those flows at the hurdle rate. None of these metrics replaces the others.