IRR Calculator
Calculate IRR (Internal Rate of Return) and MIRR from cash flows. Newton-Raphson iteration + bisection fallback for robust convergence.
IRR Calculator
Cash flow series
Year 0 is the initial investment (enter as negative). Years 1+ are returns (positive) or further outflows (negative).How to use the IRR Calculator
Enter your cash flow series
Year 0 is the initial investment — enter it as a negative number (e.g., -50000). Years 1+ are the returns flowing back to you, entered as positive numbers. Mid-life capex? Enter as negative in the relevant year.
Set your finance rate
This is your cost of capital — the rate you're being charged on debt, or the WACC of your firm. IRR is meaningful only relative to this hurdle: IRR above it = accept, below = reject.
Set the reinvestment rate (for MIRR)
MIRR assumes positive cash flows are reinvested at a realistic rate (often lower than IRR — usually the company's cost of capital or risk-free rate). MIRR fixes a known IRR flaw: regular IRR implicitly assumes reinvestment at IRR itself, which is often unrealistic.
Read the result
IRR is computed via Newton-Raphson iteration; if Newton diverges, a bisection fallback runs. NPV at IRR should be ~$0 (this confirms convergence). MIRR is shown alongside as the more honest comparable.
IRR and MIRR — the rate-of-return view of an investment
IRR is the discount rate that makes the NPV of a series of cash flows equal to zero. It answers the question: "What is the effective compound rate of return this investment earns?" If IRR exceeds your cost of capital (finance rate), the project creates value; if not, it destroys value. The intuition is elegant — you're solving for the rate at which the present value of inflows exactly equals the upfront cost. The math is less elegant: there's no closed-form solution, so we solve iteratively.
How IRR is actually computed
Newton-Raphson is the standard approach. Starting from an initial guess (we use 10%), we compute NPV at that rate and the derivative of NPV with respect to the rate. The next guess is current_guess − NPV ÷ derivative. The process converges quadratically in well-behaved cases, usually within 5-10 iterations. When NPV's derivative becomes very small or when cash flows produce wild oscillations, we fall back to bisection — narrowing the search range by half each step. Together they handle every IRR problem you'll encounter in practice. Multiple-IRR problems (when cash flows change sign more than once) are flagged for the user via the NPV-at-IRR sanity check.
IRR is the rate of return. NPV is the dollar value created. The two agree on accept/reject 95% of the time — and when they disagree, NPV wins.
Why MIRR exists
Regular IRR has a hidden assumption that quietly destroys its honesty: it assumes every positive cash flow is reinvested at the IRR itself until project end. For a project with an IRR of 25%, IRR pretends you'll find 25% reinvestment opportunities for every dollar that comes back. That's almost never true in the real world — most companies can only reinvest at their cost of capital. MIRR fixes this by explicitly using a realistic reinvestment rate (you set it) for positive cash flows and the finance rate for funding negatives. The result is almost always lower than the regular IRR — and considerably more honest. Investment bankers use MIRR for fund-level returns; corporate finance teams use IRR for quick screens and MIRR for final decisions.
The APAC corporate finance use case
IRR shows up in every Singapore investment committee deck, every Malaysia property syndication offering, every Indonesia infrastructure project paper, every Vietnam FDI evaluation, every Philippines real-estate flip pitch, every Thailand manufacturing capex review, and every Hong Kong private-equity LP statement. The percentage format travels — telling an Indonesian LP "this project's IRR is 18%" lands more directly than "this project's NPV is $14M" because the rate is portable across deal sizes. The hurdle rates differ by region (ASEAN corporate WACC is 11-16% vs US 7-10%), but the tool is rate-agnostic so it adapts to your jurisdiction.
10 Things to Know About IRR
IRR has no closed-form formula. It's solved iteratively via Newton-Raphson, Secant method, or bisection. Excel's =IRR() uses Newton-Raphson internally.
Multiple-IRR problem: if cash flows change sign more than once (negative → positive → negative), there can be multiple valid IRRs. Use MIRR or NPV to disambiguate.
MIRR's honest assumption: positive cash flows reinvest at a realistic rate (often your cost of capital), not at IRR itself. Regular IRR overstates returns for high-IRR projects.
Real estate IRR conventions: 8-12% = stabilised core, 12-18% = value-add, 18%+ = opportunistic / development. ASEAN markets typically run 200-400bps higher.
Private equity LP IRR: top-quartile US PE funds have posted net IRRs of 18-25% over 10-year horizons. Net IRR (after fees) vs Gross IRR (before fees) is a 300-500bps spread.
IRR and NPV can disagree on ranking for mutually exclusive projects of different scale. NPV wins. ("A 50% IRR on $100 is not better than a 20% IRR on $1M.")
Annualised IRR makes returns comparable across project lengths. A 100% absolute return over 5 years is ~15% IRR; over 10 years it's ~7%. Time changes the picture.
Venture capital uses IRR alongside TVPI (Total Value to Paid-In) and DPI (Distributions to Paid-In). IRR alone can be gamed via timing; the three together can't.
The hurdle-rate convention in PE/VC fund agreements: LPs typically expect 8% preferred return ("hurdle") before GPs share in profits. The carry above this is the GP's incentive.
IRR sensitivity is brutal: extending an investment by one year while holding cash flows constant can drop IRR by 200-500bps. Time horizon matters as much as cash flows.
Frequently Asked Questions
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Convention. The cash flow series for IRR uses signs to distinguish outflows (negative) from inflows (positive). Year 0 is "money out of your pocket," hence negative. Later positives are "money flowing back to you." The math depends on at least one sign change in the series — without it, there's no IRR.
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IRR implicitly assumes positive cash flows reinvest at the IRR itself. MIRR explicitly uses a separate reinvestment rate (which you provide) — usually the company's cost of capital, not the project's IRR. For a project with 25% IRR, MIRR with 8% reinvestment might come out at 16% — that's a more honest "rate of return" for the project.
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IRR requires at least one negative AND one positive cash flow. All-positive (you have inflows but no initial cost) or all-negative (you only paid out) has no IRR by definition. Check that Year 0 is negative and at least one later year is positive.
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The IRR should make NPV exactly zero by definition. If the reported NPV at IRR is more than a few cents off, the solver didn't converge cleanly — usually because of unusual cash flow patterns (extreme outliers, multiple sign changes). MIRR or direct NPV at your hurdle rate is more reliable in those cases.
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Yes, when cash flows change sign more than once (e.g., -100, +200, -50, +30). Descartes' Rule of Signs says the number of positive real roots equals the number of sign changes. This tool reports one IRR — the one found within [-99%, 1000%] starting from 10%. For multi-IRR problems, use NPV or MIRR for a definitive answer.
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ROI is total return divided by investment, ignoring timing. A "50% ROI" might be over 1 year (fantastic) or 10 years (mediocre — that's roughly 4% annualised). IRR is the annualised compound rate of return, accounting for time. Always prefer IRR or annualised ROI when comparing investments of different durations.
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Anything above your cost of capital. Practical benchmarks: stabilised core real estate ~8-12%, value-add real estate 12-18%, opportunistic / development 18%+, private equity buyout 18-25% gross, venture capital 20-35% gross. ASEAN markets typically require 200-400bps higher than developed-market benchmarks due to risk premium.
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Very. Extending project life by one year (with the same total inflows spread thinner) can drop IRR by 200-500bps. Adding 10% to the initial investment can drop IRR by 100-300bps. Always run sensitivity tables — vary key inputs ±10-20% and see how IRR moves.
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Both. IRR is intuitive for communication (everyone understands "this project earns 18%"). NPV is more rigorous for choosing between alternatives — it's the dollar value created, not just the rate. When IRR and NPV disagree on ranking mutually exclusive projects, NPV wins. The professional habit: run both, prefer NPV on conflicts.
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No. All calculation happens entirely in your browser via JavaScript. Open DevTools → Network and watch — there's zero outbound traffic. Safe for confidential investment evaluations and competitive financial modelling.
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