MulticalcIRR Calculator
Cash Flow Inputs
Results
Enter investment and cash flows to calculate IRR
Understanding Internal Rate of Return
What is IRR?
The Internal Rate of Return (IRR) is the annualized percentage return on an investment. It's the discount rate that makes all future cash flows worth exactly zero in today's money.
Simple Definition: If your IRR is 20%, your money grows at 20% per year on average.
Unlike simple ROI, IRR accounts for when you receive your money—timing matters!
Why is IRR Important?
- Compare Investments: Easy way to compare projects with different sizes and timeframes.
- Time Value: Recognizes that money received sooner is worth more.
- Decision Rule: If IRR > Your Required Rate, the investment is worth pursuing.
- Industry Standard: Used by venture capitalists, private equity, and corporations globally.
- Risk Adjusted: Higher IRR suggests higher potential returns (but also higher risk).
Key Features
Accurate IRR Calculation
Uses advanced iterative algorithms to precisely calculate the Internal Rate of Return for complex cash flows.
Time Value of Money
Unlike simple ROI, IRR accounts for when you get paid, making it essential for long-term investments.
Flexible Inputs
Handle uneven cash flows easily. Just paste your yearly returns list directly from Excel.
Export Reports
Generate professional analysis reports in PDF or CSV formats for your investment portfolio.
How to Use This Calculator
Step-by-Step Guide
-
Enter Initial Investment
Input the upfront amount invested (Year 0). Always enter as a positive number—the calculator handles the negative sign. -
Enter Future Cash Flows
Input returns for each subsequent year, one per line. Use positive numbers for income, negative for additional investments. -
Click Calculate
The calculator solves for IRR using the Newton-Raphson method. -
Review Results & Analysis
Check the IRR percentage and compare to your hurdle rate.
Data Entry Tips
💡 Tip 1: Format Cash Flows
Paste from Excel: Select the column → Ctrl+C → Paste here. Works with commas or line breaks.
💡 Tip 2: Negative Values
Use negative signs for additional investments: -500000 for a ₹5 lakh expansion cost.
💡 Tip 3: Consistent Periods
Ensure all cash flows are in the same period (all years, or all quarters).
💡 Tip 4: Error Messages
"N/A (Flux)" appears when the calculator can't find an IRR. Try adjusting cash flows or use NPV analysis.
Real-World IRR Examples
SaaS Startup Investment
You invest in a B2B SaaS startup:
- Year 0: Invest ₹100 Lakh
- Year 1-2: Negative cash flows (burn rate)
- Year 3-5: Profitable, growing returns
Decision: VC typically targets 30%+ IRR. This investment passes the hurdle rate.
Commercial Real Estate
You develop a commercial property:
- Year 0: Invest ₹50 Crore
- Year 2-3: Construction phase (no returns)
- Year 4-8: Lease income + appreciation
Decision: Real estate target is 12-15%. This is an acceptable investment if cost of capital is <12%.
Manufacturing Expansion
Your factory expands production capacity:
- Year 0: Capital investment ₹5 Crore
- Year 1-5: Additional operating profits
- Year 6: Sell equipment (salvage value)
Decision: If company WACC is 10%, this 20% IRR is attractive. Proceed with expansion.
Industry IRR Benchmarks
| Sector | Target IRR |
|---|---|
| Venture Capital | 35-50% |
| Private Equity | 25-30% |
| Infrastructure | 12-15% |
| Real Estate | 12-18% |
| Corporate Projects | 15-20% |
| Government Bonds | 5-8% |
Understanding Your Results
What Does IRR Mean?
IRR is the annualized growth rate of your investment. If your IRR is 15%, your money grows at 15% per year on average, accounting for the timing of cash flows.
Example: Invest ₹100 today, get ₹115 after 1 year = 15% IRR
IRR vs Other Metrics
IRR vs ROI: ROI shows total return, IRR shows annualized rate accounting for time.
IRR vs NPV: NPV shows absolute profit in today's rupees, IRR shows percentage growth rate.
Use both metrics for comprehensive analysis.
Formula & Step-by-Step Calculation
Mathematical Formula
IRR is the discount rate that makes NPV = 0:
0 = CF₀ + CF₁/(1+r)¹ + CF₂/(1+r)² + ... + CFₙ/(1+r)ⁿ
Where:
- CF₀ = Initial Investment (Negative)
- CF₁, CF₂... = Cash flow in year 1, 2, etc.
- r = Internal Rate of Return (IRR)
- n = Total number of years
Step-by-Step Example
Investment Scenario:
- Invest ₹1,00,000 today
- Year 1 return: ₹30,000
- Year 2 return: ₹40,000
- Year 3 return: ₹50,000
Calculation:
0 = -100,000 + 30,000/(1+r) + 40,000/(1+r)² + 50,000/(1+r)³
Solving for r using iteration: IRR ≈ 8.53%
Common Mistakes & How to Avoid Them
Ignoring the Scale Problem
Mistake: Choosing Project A with 50% IRR over Project B with 10% IRR.
- Project A: ₹10 lakh investment → ₹50% IRR = ₹5 lakh net profit
- Project B: ₹100 crore investment → ₹10% IRR = ₹10 crore profit
Comparing Mismatched Timeframes
Mistake: Comparing annual IRR to monthly interest rates.
- IRR: 12% per annum
- Alternative: 1.5% per month = ~19.6% annualized (due to compounding)
Unrealistic Reinvestment Assumption
Mistake: IRR assumes profits can be reinvested at the same IRR forever.
Reality: If markets crash, you can't reinvest at 40% IRR.
Multiple IRRs Problem
Mistake: Non-conventional cash flows (multiple sign changes) can have multiple IRRs.
Example: -₹100 → +₹150 → -₹60 (3 sign changes)
Frequently Asked Questions
Additional Resources
IRR Analysis Tips
- Compare to Cost of Capital: If IRR < WACC, the project destroys value. Reject it.
- Timing is Critical: Front-loaded returns boost IRR faster than delayed cash flows.
- Watch for Scale Issues: 100% IRR on ₹10 is worse than 5% IRR on ₹1 Crore. Use NPV alongside IRR.
- Multiple IRRs Possible: When cash flows change sign multiple times, multiple IRRs may exist. Verify manually.