ConvertOnlineIRR Calculator with NPV and Cash Flow Schedule
Report source: https://convertonline.org/calculators/irr-calculator
Enter an initial investment and yearly cash flows to estimate the discount rate that makes net present value equal to zero.
IRR Calculator
Estimated internal rate of return
Calculation schedule
| Period | Cash flow | Present value | Cumulative value |
|---|
IRR Calculator formula
IRR is the rate r that solves 0 = Σ CFₜ ÷ (1 + r)ᵗ. NPV discounts the same cash flows using the entered hurdle rate.
Unusual cash flow patterns can produce multiple IRRs or no real IRR. Review the cash flow pattern and NPV instead of relying on one rate alone.
Assumptions and limitations
- The initial investment occurs at time zero and each later cash flow occurs at the end of its year.
- Cash flows are entered before any financing effects unless those effects are included explicitly.
- IRR does not describe project size, reinvestment conditions, taxes, or risk.
Worked example
Example: three annual project returns
Invest $40,000 now, then receive $10,000, $20,000, and $30,000 at the ends of years one through three.
The estimated IRR is about 19.44%. At a 12% hurdle rate, NPV is about $6,225.86, indicating that the discounted inflows exceed the initial cost.
Frequently asked questions
What does IRR measure?
IRR is the discount rate at which the present value of the cash inflows equals the present value of the cash outflows.
Why can there be multiple IRRs?
When cash flows change sign more than once, the NPV equation can cross zero at more than one rate.
How should I use the hurdle rate?
Compare IRR with the minimum return required for the project and review NPV at that rate.
This calculator provides an estimate for planning and education. Actual cash flows, rates, taxes, fees, inflation, and investment outcomes may differ.