IRR Calculator
Enter your initial investment and cash flows for up to 10 periods to calculate the Internal Rate of Return (IRR). Supports annual, quarterly, and monthly frequencies. Shows annualised IRR %, total cash returned, net gain/loss, and MOIC.
Enter your initial investment and expected cash flows for up to 10 periods. Add an optional exit or residual value. Supports annual, quarterly, and monthly cash flow frequencies.
Total capital invested at start (entered as positive)
Enter the net cash flow received each period. Leave blank to stop at an earlier period. Negative values are allowed.
Added to the last non-zero cash flow period
Formula
NPV(IRR, cash flows) = 0 | Annual IRR from periodic rate: (1 + r_period)^periods_per_year − 1
IRR is the discount rate that sets the Net Present Value of all cash flows to zero. It is solved numerically (Newton-Raphson). For quarterly cash flows, the periodic rate is converted to an annual rate using compounding. A higher IRR indicates a more efficient use of capital per year.
Worked Example
£100,000 investment · annual cash flows of £20k, £25k, £30k, £35k · exit value £80,000 at end of Year 4.
Cash flows: −£100,000 / +£20,000 / +£25,000 / +£30,000 / +£115,000 (£35k + £80k exit)
IRR ≈ 32.4% per annum
Total cash returned: £190,000
Net gain: +£90,000
MOIC: 1.90×
At 32.4% annualised IRR, this investment significantly exceeds a typical 10–15% hurdle rate — the IRR exceeds a 20% target return, so the investment clears most institutional criteria. Compare against NPV at your required discount rate to confirm.
Use this in your workflow
Pair IRR with the NPV Calculator to evaluate whether the investment clears your hurdle rate at a specific discount rate. Use the ROI Calculator for simpler single-period return analysis. Browse all Free Business Calculators.
When to use this calculator
- →Evaluating a capital project where returns are spread across multiple years
- →Comparing two investment opportunities on an annualised return basis
- →Calculating PE, VC or real estate fund returns for reporting or investor memos
- →Building a business case showing annualised return relative to the cost of capital
Worked example: property development IRR
A useful reference before entering your own figures above.
| Item | Value |
|---|---|
| Initial investment | £500,000 |
| Year 1 cash flow (rental income) | £30,000 |
| Year 2 cash flow | £32,000 |
| Year 3 cash flow + sale proceeds | £35,000 + £620,000 |
| Total cash returned | £717,000 |
| MOIC | 1.43× |
| IRR (3-year hold) | ~14.2% p.a. |
At 14.2% p.a. IRR, this investment clears a 10% hurdle rate but may not exceed a 15% target depending on leverage costs. Compare the IRR against the NPV at 10% discount rate — if NPV is positive, the investment adds value at your required return.
Limitations
IRR assumes all intermediate cash flows are reinvested at the IRR rate, which may overstate returns for high-IRR investments. For projects with multiple sign changes in cash flows, multiple IRR solutions may exist — the calculator returns the first solution found near a 10% starting rate. IRR does not account for investment scale: a £1,000 investment with 50% IRR is not equivalent to a £1,000,000 investment with 25% IRR. Use NPV alongside IRR for capital allocation decisions. These results are for planning purposes only — not financial advice.
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Frequently asked questions
What is IRR?
IRR (Internal Rate of Return) is the annualised discount rate that makes the Net Present Value (NPV) of all cash flows equal to zero. It represents the effective annual return generated by an investment. A higher IRR indicates a more efficient investment on a per-year basis.
How is IRR calculated?
IRR is solved numerically using Newton-Raphson iteration — there is no closed-form formula. The calculator refines a rate estimate until the NPV of the full cash flow series is effectively zero. For quarterly or monthly frequencies, the periodic rate is annualised using compound frequency conversion.
What is a good IRR?
IRR is evaluated relative to a hurdle rate. Real estate projects commonly target 15–20%. VC funds may target 25–35%. Infrastructure typically uses 8–12%. An investment is generally worth pursuing if IRR exceeds the cost of capital or hurdle rate.
What is MOIC?
MOIC (Multiple on Invested Capital) is total cash returned divided by the initial investment. A 2.0× MOIC means every $1 invested returned $2. Unlike IRR, MOIC does not adjust for time. Both metrics are typically reported together.
What does "no IRR solution" mean?
IRR cannot be solved if cash flows never change sign (all outflows or all inflows). Verify that the initial investment is a positive number and that at least one periodic cash flow is positive.
How does IRR differ from ROI?
ROI is the total return as a simple percentage without time adjustment. IRR is the equivalent annualised return, accounting for the timing and sequence of each cash flow. For multi-year projects, IRR is a more meaningful comparison metric than simple ROI.