📊 IRR Calculator

IRR Benchmarks by Investment Type

"Good" IRR depends heavily on risk. Investors demand higher returns from riskier, less liquid investments. The ranges below reflect common institutional and retail benchmarks.

Note: Ranges are broad historical benchmarks, not guarantees. Higher IRR targets reflect higher risk and lower liquidity. Always compare an investment's IRR to your own cost of capital and risk tolerance.

IRR vs ROI vs CAGR — Key Differences

IRR, ROI and CAGR all measure return, but they answer different questions. Choosing the right metric prevents costly misjudgements.

Note: For projects with irregular cash flows, IRR is usually the most informative single metric, but NPV remains the gold standard for accept/reject decisions.

1. Enter the initial investment amount (the upfront cost as a positive number).
2. Enter the projected cash flows for each year, separated by commas.
3. Click Calculate to find the IRR using the Newton-Raphson method.
4. Check the verification line to confirm the NPV is approximately zero.
5. Compare the IRR to your required rate of return to decide whether to invest.

What is a good IRR?

It depends on the risk and the alternative opportunities available. For low-risk projects, an IRR of 8–12 percent may be attractive. For higher-risk ventures such as startups or real estate development, investors often seek IRRs of 15–25 percent or more. Always compare the IRR to your cost of capital or the return you could earn elsewhere at a similar risk level.

Why might the calculator fail to find an IRR?

If all cash flows are positive (no initial investment) or all are negative (pure cost with no return), there is no meaningful IRR. If the cash flows change sign more than once, there may be multiple IRRs, and the calculator reports only the one closest to a 10 percent starting guess. In such cases, NPV analysis is more reliable than IRR.

How is IRR different from ROI?

ROI (Return on Investment) is a simple ratio of total profit to total cost, with no regard for the timing of cash flows. IRR accounts for the time value of money, so it recognises that earning returns sooner is better than earning them later. For multi-year investments, IRR is almost always the more informative metric.

What does the NPV verification line tell me?

It shows the NPV recalculated at the found IRR rate. A correct IRR should drive this value to approximately zero (within a fraction of a cent). If you see a large number there, the numerical method did not converge properly, which usually means the cash flow pattern is unusual and you should double-check the result manually.

This tool is for informational purposes only and does not constitute financial advice. Consult a qualified financial professional for advice specific to your situation.

IRR is most reliable for conventional cash flow patterns — one initial outflow followed by a series of inflows — because unconventional patterns with multiple sign changes can produce multiple or no valid IRRs. When comparing projects of different sizes or durations, prefer the NPV rule over the IRR rule, because IRR can misleadingly favour small, short projects over larger ones that create more total value. Be cautious about using IRR for reinvestment assumptions: the method implicitly assumes you can reinvest intermediate cash flows at the IRR itself, which may be unrealistically high for very profitable projects. For a more conservative estimate, calculate the Modified IRR (MIRR) using a realistic reinvestment rate. Finally, always stress-test your cash flow assumptions — a project that looks great at a 20 percent IRR can become marginal if revenues come in 10 percent below forecast, so model a range of scenarios before committing capital.