IRR Calculator
What is an internal rate of return (IRR) calculation?
This IRR calculator calculates an annualized rate-of-return plus profit (loss).
- Supports dated cash flows
- Easy bulk data entry
- Save entries to a file for later recall
- Know your rate of return across multiple accounts and investments
Answers the question: "How am I doing?"
The IRR is an annualized rate-of-return on an investment. It is calculated using only cash flow amounts for inputs and does not depend on an interest rate, thus the term "internal." The calculator uses Newton's method to calculate the IRR.
An Internal Rate of Return Calculator (IRR) is used to calculate an investment's bottom line. You can use the results for bragging rights, or more importantly, to compare two or more different investment options.
This calculator will calculate the IRR for a complicated series of cash flows as well as the total invested, total returned and the profit (or loss). It supports both irregular length periods and exact date data entry.
On the other hand, the frequency option makes it easy to set up regular cash flows such as daily, monthly, or quarterly. (You have eleven from which to pick!)
Make sure that you check out the usage tips below (click to scroll).
Information
- Feb. 13: Change the calculator's layout so that user can add a description to each cash flow. The description is not required.
- Feb. 16: On smaller desktop monitors, the browser should set the calculator, by default, to an easier-to-use size — no change for mobile devices. Users can always adjust the size by clicking the '-' or '+' buttons. Please let me know if you have any difficulties. The sizing improvement will be rolled out to nearly all calculators over the coming weeks.
Why is IRR useful beyond bragging rights?
IRR is a Very Useful Number because it gives the investor the ability to compare investments. That is, the IRR normalizes the results for different cash flows.
Take, for example, two rental properties that are for sale. The offer price for both buildings is about the same. Projected rents are about the same. However, one will have a higher upfront renovation cost while the other has higher property taxes. How does an investor know which purchase represents a better investment?
They can use an IRR calculator to make this determination.
A note of caution. When comparing investments, never make the comparison using internal rates of return calculated with different calculators.
Why is that?
Because two different calculators may calculate the results slightly differently, and neither one of them will necessarily be wrong either. (Consider for a moment that Microsoft Excel has two IRR functions that may calculate different IRRs for the same cash flows.) You don't need to get hung up on this idea. But it is something to be aware of so that you understand how to use the results correctly.
For the record, this calculator calculates the IRR using Newton's method and counting days (some calculators count periods).
If you want to try a calculator that uses another IRR calculation algorithm, look no farther than this site's Annual Percentage Rate (APR) calculator. The APR calculator follows the method specified in the Truth-in-Lending Act for calculating APR (which is an IRR calculation).
Calculator usage and tips
- Zero amounts have no impact on the IRR result. If you set the frequency to "Monthly," and there are only four cash flows in a year, you may leave eight initialized to 0. The same applies to 0 amounts after you've entered the final liquidation value.
- Enter the investment's current or final value as the last cash flow. If you are calculating the IRR for a stock or mutual fund, and you still own the investment, you should enter the investment's value as the last amount.
- You do not need to enter cash flows in date order. The calculator will sort them before calculating the result. This feature is handy, of course, if you realize that you missed entering a cash flow. Enter the amount in any available cell. Then change the date associated with that cell. Click "Calc" to sort.
- If you mistakenly duplicate a cash flow, set one of the duplicates to "0".
- Changing the "First Cash Flow Date" will reset the dates without clearing the values you've entered.
- Depending on the order you use "First Cash Flow Date," "Remove 0's" and "Add Series," the "First Cash Flow Date" may not be the first date in the input area. This is not a bug. Changing "First Cash Flow Date" initializes a series starting on the date selected. However, the user can change the date, or it can be removed with "Remove 0's" if the value for the start date is 0. Finally, a user can insert a series with a date before "First Cash Flow Date."
- Calendar Tip: When using the calendar, click on the month at the top to list the months, then, if needed, click on the year at the top to list years. Click to select a year, select a month, and select a day. Naturally, you can scroll through the months and days too. Or you can click on "Today" to quickly select the current date.
- If you prefer not using a calendar, single click on a date or use the [Tab] key (or [Shift][Tab]) to select a date. Then, as mentioned, type 8 digits only - no need to type the date part separators. Also, because the date is selected, you do not need to clear the prior date before typing. If your selected date format equals mm/dd/yyyy, then for Dec. 1, 2024, type 12012024.
- And don't stress out: you do not need to enter the cash flows in date order. You have a computer. It and this calculator are smart enough to sort the cash flows for you once you've clicked the "Calc" button.
And now to repeat an essential word about IRR calculators.
Different IRR calculators may use different algorithms for finding the rate-of-return. (There is no equation or formula for calculating IRR.) Therefore, don't compare the results from one IRR calculator for one investment with results from another calculator for a different investment. Always use the same calculator to compare different investments.
IRR is the annualized return on an investment expressed as a percentage.
The investment can be made up of a series of cash flows. That is, there can be more than one investment or one withdrawal. (However, there has to be at least one or each.) The cash flows may occur on any date and for any amount.
It is essential to use the right sign (positive or negative) for each cash flow. How do you know what the correct sign is?
Think of it this way. When you first invest, you have to write a check or transfer funds. Writing a check decreases your account balance. Therefore, enter all investment cash flows, including the "Initial Investment" as negative values.
When you earn money back on your investment, you can deposit it into your checking account. The return increases your account balance. Therefore, enter all investment returns, including the final liquidation value of your investment, as positive values.
The scheduled dates update every time you change the "Cash Flow Frequency." The new dates are calculated based on the "First Cash Flow Date." But the "Cash Flow Frequency" has no direct impact on the IRR result per se. The calculator only uses the "Cash Flow Frequency" setting to create dates that most closely match your investment cash flows. If, in general, you only make additional investments (or withdrawals) twice a year, then set "Cash Flow Frequency" to "Semiannually" for example.
Michael says:
Hi. I am thinking of comparing projected returns from a potential investment versus keeping money in my bank account. Since the measure of return from my bank account over a specified time period can be thought of as a compound interest return, would it not make more sense to compare that to a potential investment’s projected compound interest return (as opposed to an IRR)?
When it comes to investments, it seems like IRR is everywhere, but compound interest return is not?…
Thank you for your thoughts.
Karl says:
The IRR is not a compounded rate. What an internal rate of return calculation is doing is normalizing investment cash flows so that they may be compared. You can use this IRR calculator to calculate the IRR for the bank account as well, and then compare it with the investment you are considering.
Note, whenever you are using an IRR to compare investments, make sure you use the same IRR calculator for the calculation. It’s possible that 2 different calculators could use different methods for their calculation and thus they would have slightly different results.
Does that answer your question?
bob crossman says:
So what I want to do is figure my annual rate of return but I will have a beginning date & investment amount, monthly/yearly cash flows, AND a final ending value on a certain date.
My use: I bought a property for $110,000 on 1/1/2016. I’ve had yrly cash flows of: 2016- $3765, 2017- $4451, 2018- 1484, 2019- $7553 and at the end of 2019 the property will be worth $198,400.
I thought your IRR would accomplish that but you have no place to put in an ending value and date.
What calculator do I need to do what I want? Do you have?
Thanks
Karl says:
Hi, you are using exactly the right calculator. If you are entering investments as negative values, then the final value is entered in the grid as a positive value as of the date required. That is, the final value is entered as a withdrawal from the investment as of the date you want the IRR even if the withdrawal isn’t actually made – but the value of the investment would be available to withdrawal should you so choose. Let me know if this isn’t clear.
Sahil says:
Hey Carl,
I am actually looking to replicate this calculator for my personal use. Do you mind sharing how did you go about in creating such a wonderful tool?
Thanks in anticipation!
Karl says:
How did I do it? Years of study. There’s no need to replicate this calculator. Just continue to use it. It’s not going anywhere!
Bob Schneider says:
Do you have a calculator that would factor in the tax bracket, depreciation, interest writeoff and operating losses on top of the usual income, expenses??
I’m looking for an after and before tax return
Karl says:
Nothing that handles all your requirements, I’m afraid.
This calculator will give you the bottom line,after tax, rate-of-return. However, as you can see, you would need to know the expenses (the tax amount, the depreciation etc) and enter them as expenses.
The MACRS depreciation calculator will calculate your depreciation expense which can be entered into this calculator.
The investment calculator will consider taxes (tax rate) but the cash flow needs to be regular.
Bob Schneider says:
This is for real estate development. I guess I could compute the yearly depreciation, operating losses & interest costs “below” the NOI as notes but there would be no computation of these on yield.
Karl says:
Sorry, I’m not following. I had understood that you wanted an IRR after these expenses? If that’s the case, then they have to be entered into the calculator.
Bob says:
So depreciation can be added as an expense? Like any other?
I also am looking to compute after tax yield upon sale.
Tkz
Karl says:
When calculating an annualized rate-of-return (which is what IRR is), everything boils down to a income or expense; a buy or sell; or a debit or credit.
So yes, you can enter depreciation as an expense. If you want an after tax rate-of-return, then you would include estimated taxes as an expense as well. And of course if you want to know the rate of return before taxes, you would not include the taxes as an expense.
As mentioned previously there is a depreciation calculator on this site what will calculate the depreciation amounts for each year that you can use in this calculator.
The key in getting an IRR that is meaningful for you is correctly including each item and not reversing amounts – negative when it should be positive or vice versa.
Bob Schneider says:
Karl-
Thanks for the input. I will continue to look.
Bob
Erik Graper says:
Great work on the calculators! Thanks for sharing the knowledge. Thank you!!
Linda says:
There is a red box on right side of screen “Would you like to be able to save your work, customize printed reports, export to Excel…..
When I click that box, I get a screen that has AccurateCalculators.com and your copyright. Should there be info on how to accomplish things in red box?
I am having difficulty saving the data. I can paste link into email but I would like to save it as a file so I can come back and add additional info.
Karl says:
Thank you for letting me know about the link in the red box being broken. It is supposed to take you to this page:
store – products
SolveIT! for Windows has an IRR calculator that let’s the user save to a file. Cost $69.95 per user.
However, would you like the free solution? You can use the custom URL, paste it to the browser address bar and then create a shortcut on your desktop.
see this page for details.
Or you can just copy/paste the custom URL into a text file (also on your desktop) and then use it to open the calculator later to reload your entries.
CA Subashree Hariharan says:
Thanks, very useful tool.
CA Subashree Hariharan
India
Karl says:
Thank you. Glad you found it useful.
EC says:
Karl
Can I use this to find the IRR for a lump sum pension versus monthly pension?
Karl says:
Yes, you can do that. Have you tried it, and had a problem getting a result? If so, tell me about what you are entering and I’ll try to provide some guidance.
Melanie says:
Which IRR calculator amongst these do you feel is the most applicable to use for the aforementioned lump sum versus monthly payout pension question?
Karl says:
You posted your question on the IRR calculator page. That’s the calculator I think will do what you need, though I’m not entirely clean on what you mean by “which IRR calculator” as this site only has one calculator identified or called IRR calculator.
So I’m a bit confused by your question. 🙂
Melanie says:
Thank you for your response. My apologies for the confusion.
Perhaps I should have phrased my question more as a comparison between the IRR versus the Retirement versus the Investment calculators, specifically when making an assessment to determine whether to take the present day lump sum of a pension versus the ongoing future monthly payments.
Thank you again.
Karl says:
Oh, I think I understand now. If you want to know which is more valuable to you, a lump sum now, or a stream of future payment, you need to use this present value calculator.
What you’ll do is compare the calculated present value to the lump sum promised. If the calculate PV is greater than the lump sum, then take the monthly payments. Take a look at the calculator, and if you have questions, just ask.
Kevin says:
Hi I am trying to determine whether making the investment is sound; a friend has asked for a loan of $20,000 at 10% annual interest for a $350,000 project contract that he has won. His TOTAL cost is going to $310,000 and hence he will be making $40,000. He will return the loan amount of $20,000 and 10% interest in 18 months. His project cash flow : cash in and cash out
Q1 ’20 cash in = $60,000
Q1 ‘ 20 cash out = 0
Q2 ‘ 20 cash in = $50,000
Q2 ‘ 20 cash out = $50,000
Q3 ‘ 20 cash in = $64,000
Q3 ‘ 20 cash out = $55,000
Q4 ‘ 20 cash in = $62,500
Q4 ‘ 20 cash out = 60,000
Q5 ’21 cash in = $77,000
Q5 ’21 cash out = $52,400
Q6 ’21 cash in = $99,400
Q6 ’21 cash out = $39,500
How would I use your calculator to determine the IRR and if I should be making this investment? Tried using the calculator but seem to not get a hang of it
Karl says:
Thanks for your question Kevin.
I’m not sure if I understand completely. Are you asking if your loan of $20,000 is a good investment? I what you describe as two different investments and thus 2 different IRRs are appropriate. First, your friend has an investment with is’s associated cash flows. Then your investment is the loan, with its cash flows.
So, for example, from your point of view, I suspect you want an IRR on the loan.
Your investment is the $20,000 loan. Enter that as the initial investment as a negative value. Then enter the payments you are scheduled to receive on the dates expected as positive values. Then calculate your IRR. Since this is an internal rate-of-return calculation, it does not mater what is interest or what the interest rate of the loan is. You just record the payments.
Does that help?