IRR Calculator

The IRR Calculator finds the annualised return implied by a series of cash flows. It is the discount rate at which the Net Present Value of the project equals zero — a way to express a project’s profitability as a single percentage.

How to interpret IRR

• IRR > required return — accept the project.
• IRR = required return — break-even.
• IRR < required return — reject; capital is better deployed elsewhere.

Limitations

IRR assumes intermediate cash flows are reinvested at the IRR itself, which is unrealistic for very high IRRs. When projects alternate between positive and negative cash flows, multiple IRRs can exist — in those cases NPV at a fixed discount rate is the safer decision tool.