IRR Calculator
Calculate the Internal Rate of Return (IRR) for a series of cash flows. Evaluate whether an investment is worth pursuing based on its true annualized return.
CASH FLOWS (negative = investment, positive = return)
INTERNAL RATE OF RETURN
17.09%
TOTAL INVESTED
₹1.00 L
TOTAL RETURNS
₹1.50 L
NET GAIN
₹50,000
What is IRR?
Internal Rate of Return (IRR) is the discount rate that makes the Net Present Value (NPV) of all cash flows equal to zero. In simple terms, it's the true annualized return of an investment when you account for the timing of each cash flow.
IRR vs CAGR
- CAGR: Works with a single investment and final value — one cash inflow, one outflow
- IRR: Handles multiple irregular cash flows — SIPs, partial withdrawals, dividends, etc.
IRR is more powerful because real-world investments rarely have just one entry and exit point.
Decision Rule
If IRR > your required rate of return (hurdle rate), the investment is worth pursuing. If IRR < hurdle rate, look for better alternatives.
Where:
- IRR = Internal Rate of Return (the rate that makes NPV zero)
- CFₜ = Cash flow at time period t
- t = Time period (0, 1, 2, ... n years)
- NPV = Net Present Value (set to zero to find IRR)
📝 Worked Example
Invest ₹1L, get ₹30K, ₹35K, ₹40K, ₹45K over 4 years
-100000 + 30000/(1+r) + 35000/(1+r)² + 40000/(1+r)³ + 45000/(1+r)⁴ = 0= IRR ≈ 16.82%