IRR Calculator
Internal rate of return answers a simple question: what annualised growth rate turns a series of periodic outflows into the inflows that followed them. It is the discount rate at which an investment's net present value reaches zero, making it the standard metric for projects, business decisions and funds on a fixed period ladder.
Enter values
Results
- IRR (annualised return)
- 8.43%
- Net profit
- ₹1,20,000.00
- Cash multiple
- 1.24×
How is the IRR calculated?
Enter the initial investment and the cash received at the end of each of the four years. The outlay counts as negative and every inflow as positive; the calculator discounts them at a trial rate, halves the bracket wherever the net present value changes sign, and repeats until it lands on the IRR. Net profit and the cash multiple sit beside that headline rate.
Formula
NPV(r) = −I + CF₁ ÷ (1 + r) + CF₂ ÷ (1 + r)² + … + CF₄ ÷ (1 + r)⁴ = 0 I is the initial investment and CFₜ the inflow at the end of year t. The periods are exactly one year apart — that assumption is what separates IRR from XIRR, which lets every flow carry its own calendar date.
Example
A project needs ₹5,00,000 today and pays ₹1,20,000, ₹1,40,000, ₹1,60,000 and ₹2,00,000 at the end of years one to four. Total received is ₹6,20,000, so the net profit is ₹1,20,000 and the cash multiple is 1.24×. Discounting those four payments puts the IRR at 8.43% a year — the rate at which the stream is worth exactly the ₹5,00,000 you spent.
Things to remember
IRR is powerful when cash flows follow a clear period ladder and the investment turns a profit, but it can produce multiple or misleading answers when the sign of the flows flips more than once. Report it alongside NPV, and fall back on XIRR when timing within a period matters.
Frequently Asked Questions
What does IRR tell me in plain language?
It is the annual growth rate your money earns when a project returns cash in uneven chunks. An IRR of 15% means the payments behave as though your ₹5,00,000 compounded at 15% each year, even though the actual rupees arrived in separate instalments rather than as one balance.
What is a good IRR for an investment?
Anything above your cost of capital and above your best alternative — roughly 10–12% for most Indian investors. A rental flat showing a 7% IRR looks weak against the long-run equity average, while the identical 7% comfortably beats a fixed deposit paying 6.5%.
What is the difference between IRR and XIRR?
IRR assumes each cash flow arrives exactly one year after the last one, so it needs no dates at all. XIRR accepts a date for every flow and discounts by the actual days between them, which is why portfolio statements and irregular timing call for XIRR instead.
Why has my project's IRR turned negative?
When the inflows total less than the outlay, no positive rate can price them to zero and the solver reports a negative result. A ₹1,00,000 project returning ₹20,000 a year for four years settles near −8.4%, which is a plain signal that capital has been lost.
Related Calculators
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