IRR Calculator: Internal Rate of Return and NPV
Enter what you put in and the cash you expect each year. See your yearly rate of return, whether it beats your target, and when you get your money back.
What we noticed
Year by year
How this calculator works
The internal rate of return (IRR) is the yearly rate at which the cash you get back, brought to today's money, exactly equals what you put in. It is one number that sums up the whole investment, including when each payment arrives.
Net present value (NPV) brings every cash flow back to today using your target rate. A positive NPV means the investment beats your target. A negative NPV means it falls short.
We use 5 years of cash flows and an optional sale value at the end of year 5. IRR assumes every payout can be reinvested at the same rate, which is not always true.
The formulas
| NPV | Sum of (cash flow / (1 + rate) ^ year), less the amount put in |
|---|---|
| IRR | The rate that makes NPV equal to zero |
| Payback | The year your running total gets back to what you put in |
Sources: Background reading, Investor.gov: Annual return, Background reading, Investor.gov: Compound interest
Frequently asked questions
What is IRR?
The internal rate of return is the yearly rate of return that takes into account when each payment comes. It makes the present value of all your cash flows equal to what you put in.
What is NPV?
Net present value is the value today of all your future cash flows, at your target rate, minus what you put in. Above zero means they are worth more than you put in at that rate.
What is a good IRR?
One that is above the return you could get elsewhere for similar risk. That is why we ask for your target rate.
Why can the IRR be unclear?
If you get back less than you put in, the IRR is simply negative. If the cash flows switch between money in and money out several times, more than one rate can fit, so rely on the net present value. We search from -90% to 1,000% a year.
What is the difference between IRR and ROI?
ROI ignores timing and only compares the total. IRR counts when each payment arrives, so it suits investments with cash coming in over several years.