Calculate internal rate of return for investments.
IRR is the discount rate r that makes the net present value of a cash-flow series equal to zero: Σ CF_t / (1+r)^t = 0.
Investing $10,000 that returns $3,500/year for 4 years has an IRR of about 14.9%.
Internal Rate of Return is the annualized rate at which an investment's cash flows break even, useful for comparing projects of different sizes and timelines.
ROI measures total growth without timing, while IRR accounts for when each cash flow occurs and annualizes the return.
Yes. IRR assumes reinvestment at the same rate and can favor short projects. Compare against the net present value at your required return.
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