IRR calculator
The internal rate of return is the discount rate at which an investment's net present value is exactly zero. There is no closed formula for it — it is found numerically — and a project is worth doing when its IRR exceeds the return you require.
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Internal rate of return
23.375%
Rates and thresholds
- Definition
- IRR is the r for which NPV(r) = 0
- Decision rule
- IRR > required return → the project is worth doing
- Multiple solutions
- Possible when the cash flow changes sign more than once
Why can an IRR have more than one value?
The IRR is a root of a polynomial equation, and there can be as many roots as there are sign changes in the cash flow. A conventional investment — one outlay up front, receipts thereafter — has exactly one. But if the project needs a second large investment partway through, or ends with an expensive wind-down, the sign changes several times and several IRRs may exist. When that happens the IRR is not a sound basis for a decision and you should look at NPV instead.
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