IRR Calculator | Internal Rate of Return

IRR Calculator

Educational tool to calculate Internal Rate of Return, MIRR, and analyze investment performance

📚 How to Use This Calculator

Initial Investment: Enter your upfront cost as a negative number (e.g., -100000 for $100,000 investment)
Annual Cash Flows: Add expected returns for each year (can be positive or negative)
Calculate: Click "Calculate IRR" to see results and visualizations
IRR Interpretation: The rate at which your investment breaks even (NPV = 0)
MIRR: Modified IRR assumes reinvestment at your specified rate (more realistic)
Payback Period: How long until you recover your initial investment

📊 Input Section

Initial Investment ($)

Reinvestment Rate (%) for MIRR Rate at which positive cash flows can be reinvested (0-100%)

Annual Cash Flows ($)

Year 1:

📈 Results & Analysis

What is IRR?

IRR is the interest rate at which your project breaks even — where the money you invest today equals the value of all the cash you get back tomorrow.

Here’s the idea:

If you invest $12,000 today, and your project gives you steady returns over 5 years, the IRR tells you what annual rate of return you’d be earning over those years.

If your IRR is:

Higher than your required rate (a.k.a. "hurdle rate") → Go for it!
Lower than your hurdle rate → Rethink the project.
Exactly equal → You’re just breaking even on expectations.

So, IRR helps answer the golden question in project planning:

“Is this engineering project financially viable over time?”

IRR vs. NPV: Which is Better, and When?

Great question! Let’s break down the two big players in project evaluation:

Metric	IRR	NPV
Definition	Rate where NPV = 0	Net value today of future cash flows
Unit	% (Rate of Return)	Currency ($, €, ₹)
Use Case	Quick comparison between projects	Understanding total value created
Sensitive To?	Unusual cash flow patterns	Discount rate you choose
Best For	Simpler projects with conventional cash flows	Complex or multi-stage projects

In Simple Terms:

Use IRR when: You want a quick sense of return in percentage form — especially helpful when comparing multiple small projects.

Use NPV when: You need the actual value the project adds, or if you’re evaluating projects with non-standard cash flows (e.g., funding gaps, reinvestments).

Pro Tip for Engineers

In real-world engineering:

Use IRR to communicate with managers/investors ("Hey, this project returns 12% annually!")
Use NPV for deep planning — especially when multiple risks, timelines, or funding strategies are involved

Bottom line

IRR is your project’s report card score — if it passes the class (your benchmark rate), it’s worth pursuing!
NPV tells you how much gold is actually in the treasure chest.

Use our NPV calculator to evaluate your project.

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