IRR Calculator
Computes Internal Rate of Return for evaluating the profitability of potential investments
Enter all fields to calculate IRR
How IRR compares to cost of capital
Frequently Asked Questions
What is Internal Rate of Return (IRR)?
IRR is the discount rate that makes the NPV of an investment equal to zero. It represents the annualized rate of return the investment is expected to generate. Higher IRR means a more profitable investment.
How do I use IRR to make decisions?
Compare IRR to your cost of capital or hurdle rate. If IRR exceeds your hurdle rate, the investment adds value. When comparing projects, the one with the higher IRR is generally preferred, though NPV may give different rankings for different-sized investments.
What are the limitations of IRR?
IRR assumes cash flows are reinvested at the IRR rate, which may be unrealistic. It can give multiple results for non-conventional cash flows. For mutually exclusive projects of different sizes, NPV is often a better metric.
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