IRR & NPV Calculator
Calculate Internal Rate of Return, Net Present Value, payback period, and sensitivity analysis for any investment or project.
IRR (Internal Rate of Return) is the discount rate that makes the NPV of all cash flows equal to zero — it's the true annualized return of an investment. NPV (Net Present Value)measures how much value an investment creates in today's dollars at your required rate of return. If NPV is positive, accept the investment. If IRR exceeds your hurdle rate, accept the investment. This calculator uses Newton-Raphson iteration to solve IRR precisely and shows year-by-year present values and NPV sensitivity across all discount rates.
How IRR and NPV Are Calculated
Both metrics discount future cash flows back to present value. Money today is worth more than money tomorrow — the discount rate captures this time preference and investment risk. NPV sums all discounted cash flows. IRR finds the rate that makes NPV exactly zero.
| Variable | Definition |
|---|---|
| CFt | Cash flow in period t (positive for inflows, negative for outflows) |
| r | Discount rate / hurdle rate (required rate of return as a decimal) |
| t | Time period (0 = today, 1 = year 1, etc.) |
| NPV | Positive = project creates value above hurdle rate. Negative = destroys value. |
| IRR | The annualized return rate of the investment. Accept if IRR > hurdle rate. |
Worked Example: You invest $100,000 with expected cash flows of $25K, $30K, $35K, $40K, $50K over 5 years. At a 10% discount rate: NPV = $33,492 (positive — accept). IRR = 20.3% (exceeds 10% hurdle — accept). Payback period = 3.25 years. The project creates $33,492 in value above the minimum required return.
💡 Expert Pro-Tip
Use NPV to Decide, IRR to Communicate: When comparing two projects, NPV is the correct decision metric — it tells you which creates more absolute dollar value. IRR can mislead: a 30% IRR on a $10,000 project creates less value than a 15% IRR on a $500,000 project. But IRR is perfect for communicating to investors and stakeholders: "this deal returns 22% annually" is instantly understood. The benchmark IRR for real estate syndications in 2026 is 12–15%. Private equity targets 20%+. If your IRR barely beats a low-risk index fund (7–10%), the additional operational risk may not be worth it.
IRR & NPV FAQ
When should I use IRR vs. NPV?
Use NPV when comparing mutually exclusive projects (you can only choose one) or when project sizes differ significantly. NPV tells you which creates more absolute value. Use IRR when you want to communicate return efficiency or compare against a known hurdle rate. For projects with normal cash flow patterns (one initial outflow, followed by inflows), IRR and NPV lead to the same accept/reject decision.
What does a negative NPV mean?
A negative NPV means the investment's discounted returns don't meet your required rate of return — you would be better off investing that capital elsewhere at your hurdle rate. However, a negative NPV doesn't mean the project loses money in absolute terms — it means it returns less than your minimum threshold. Lower your hurdle rate and NPV may turn positive (see the sensitivity table).
How do I use this for real estate investment analysis?
Enter your purchase price + closing costs as the initial investment. Enter annual net operating income (NOI) minus mortgage payments as annual cash flows. Add the projected sale price (net of selling costs) to the final year's cash flow. Use 8–12% as your discount rate for residential rental properties. If NPV is positive and IRR exceeds your hurdle rate, the investment meets your return criteria.
What is MIRR and how is it different from IRR?
Modified IRR (MIRR) assumes cash flows are reinvested at your cost of capital (rather than the IRR itself). This produces more realistic results for high-IRR projects, since it's rarely possible to reinvest all cash flows at a 30%+ rate. MIRR is generally lower than IRR but considered more accurate. Most Excel users use the =MIRR() function with a reinvestment rate matching their hurdle rate.
IRR & NPV Calculator
Investment Inputs
Investment Analysis
Based on your results — what to do next:
Simple ROI without time discounting
Your undiscounted ROI is 80.00% on $100,000 invested — compare to the NPV-adjusted $32,183 figure here.
Value a business using these cash flows
$180,000 in total projected inflows — apply a multiple to see the enterprise value this supports.
Compare to passive investment returns
Your IRR of 20.53% — see if index fund investing at 7–10% beats your project.