Investment appraisal

Internal rate of return (IRR) calculator

IRR is the discount rate at which an investment's NPV equals zero — the compound annual return the cash flows actually deliver, including a sale at the end.

Inputs

Result

Internal rate of return

21.88%

Total cash returned
USD 1,100,000
Money multiple (MOIC)
2.2x
NPV at your hurdle rate
USD 30,375.51
Verdict
Clears the hurdle rate
  • IRR assumes interim cash is reinvested at the same rate — sense-check it against NPV.

How to use this calculator

  1. 1Enter the initial investment as a positive amount.
  2. 2Enter the annual cash flow received and the number of years held.
  3. 3Enter any exit or residual value received in the final year.

IRR, hurdle rate and MOIC

If IRR exceeds your hurdle rate, the investment clears its cost of capital. Money multiple (MOIC) shows total cash returned per unit invested and ignores timing, so investors quote both.

A 3x return over four years is a 32% IRR; the same 3x over eight years is only 15%. Time is the variable most business cases underweight.

Where IRR misleads

IRR assumes interim cash flows are reinvested at the IRR itself, which flatters high-return projects. It can also produce multiple solutions when cash flows change sign more than once.

For capital-rationed decisions, use NPV to size value created and IRR to compare efficiency, never IRR alone.

Call this tool from the API

Every calculator on this site is also an endpoint. Get a free key from the developer page and call it from your product, spreadsheet or AI agent.

curl -X POST https://utopiavalue.co/api/v1/tools/irr-calculator \
  -H "Authorization: Bearer $UTOPIA_API_KEY" \
  -H "Content-Type: application/json" \
  -d '{"initialInvestment":500000,"annualCashFlow":90000,"years":5,"exitValue":650000,"hurdleRatePercent":20,"currency":"USD"}'

Frequently asked questions

What IRR should I target?

Private business acquisitions are typically underwritten to 20-30% IRR; property and infrastructure deals accept far less because risk is lower.

Why does the calculator return no result?

If total cash returned never exceeds the amount invested, there is no positive rate that solves the equation.

Does IRR include leverage?

Only if your cash flows are after debt service. Equity IRR is usually much higher than project IRR for the same asset.