IRR Calculator: Internal Rate of Return of Cash Flows
IRR is the annual return an investment earns from its cash flows. Compare it with your hurdle rate to decide whether a project is worth doing.
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What IRR Means
There is no direct formula, so IRR is found by trial and error — the calculator does this instantly. Example: 100,000 invested for cash flows of 30,000 rising to 50,000 over five years gives an IRR of 25.75%.
Works in any currency — enter all amounts in the same one.
IRR vs NPV vs ROI
| Measure | Answers | Watch out for |
|---|---|---|
| IRR | What yearly return does this earn? | Assumes reinvestment at the IRR; can mislead for very different project sizes |
| NPV | How much value does this add today? | Depends on the discount rate you choose |
| ROI | What total % did I gain? | Ignores how long it took |
| MOIC | How many times my money did I get back? | Ignores timing completely |
Typical Hurdle Rates
- Established companies: often their WACC plus a margin, commonly 8%–15%.
- Small business investments: frequently 15%–25%, reflecting higher risk.
- Venture capital: funds often target 25%+ IRR on individual deals because many fail.
When IRR Breaks Down
- If cash flows change sign more than once (for example a big repair cost in a later year), there can be more than one IRR — use NPV instead.
- For cash flows on irregular dates, use XIRR.
- A high IRR on a small, short project can add less value than a lower IRR on a large one.
Frequently Asked Questions
What is a good IRR?
One that beats your hurdle rate or cost of capital. Many businesses look for 15% or more on new projects; investors in startups target higher.
How do I calculate IRR in Excel?
Put the initial investment as a negative number followed by the yearly cash flows, then use =IRR(range). For dated cash flows use =XIRR(values, dates).
What is MOIC?
Multiple on invested capital: total cash returned divided by cash invested. A 2× MOIC doubles your money, regardless of how long it took.
Why does my calculation show no IRR?
IRR only exists when the cash flows turn from negative to positive. If inflows never exceed the investment in a way that changes the sign, no rate makes NPV zero.