IRR (internal rate of return) answers one question: what annual return does this stream of cash flows actually deliver?
About this calculator
IRR (internal rate of return) answers one question: what annual return does this stream of cash flows actually deliver? Enter the money you put in today and the inflows you expect each year. The calculator finds the rate that makes the present value of every cash flow net to zero.
Use IRR when comparing projects with different sizes and timing — a solar installation, a rental property, a franchise, or a business expansion. If IRR beats your cost of capital (say 12% for a small business loan or 15% for equity), the project likely creates value. The output also shows NPV at 10% and a simple payback year count so you can cross-check the headline rate.
IRR has limits: it assumes you reinvest every intermediate inflow at the same IRR, which is rarely true. Multiple sign changes in cash flows can produce more than one valid IRR. For a fuller picture pair this with the [[npv]] calculator at your actual hurdle rate, the [[payback-period]] calculator for liquidity risk, and the [[roi]] calculator for a simpler total-return view. The [[investment]] calculator helps model lump-sum growth over time.
Common uses
- Evaluate a rental property — upfront cost vs yearly rent minus expenses
- Compare two business projects with different cash flow timing
- Check if a franchise investment beats your loan interest rate
- Screen startup or angel deals before detailed due diligence
- Homework and CFA-style DCF exercises with year-by-year flows
Frequently asked questions
What is a good IRR for an investment in India?
There is no single threshold — it depends on risk and your cost of capital. Many investors use 12–15% as a hurdle for moderate-risk projects. Fixed deposits pay 6–7%; long-run equity indices have returned roughly 12% nominal. If IRR beats your borrowing rate plus a risk premium, the project is worth a closer look.
Why does the calculator say it cannot solve IRR?
IRR needs at least one sign change in the cash flow series — typically a negative outflow followed by positive inflows. If all flows are positive or all negative, no rate makes NPV zero. Check that the initial investment is entered as a positive number; the engine treats it as an outflow automatically.
How is IRR different from ROI?
ROI is total gain divided by initial cost, ignoring when money arrives. IRR accounts for timing — ₹1 lakh received in year 1 is worth more than the same amount in year 5. Two projects with identical ROI can have very different IRR if cash arrives at different times.
Can IRR be negative?
Yes. A negative IRR means the project destroys value at any positive discount rate — total inflows, even at their actual timing, do not recover the initial outlay when compounded. That is a clear reject signal unless strategic reasons override financial returns.
What cash flow pattern fits a ₹5 lakh investment returning ₹1.5 lakh per year for five years?
Enter initial investment 500000 and cash flows 150000, 150000, 150000, 150000, 150000. The calculator returns IRR near 15%, NPV at 10%, and the year cumulative inflows exceed the outlay. Adjust amounts if your inflows vary by year.