IRR Calculator

IRR or internal rate of return denotes the annual rate of growth that any investment expects to generate. Here, the term internal means the calculation excludes external factors like inflation, risk-free rate, capital cost, etc. IRR serves as a financial metric to estimate the profitability of your investments.

IRR is the discount rate that makes the NPV or net present value of the cash flows equal to zero.

To calculate the IRR of an investment, you only require the cash flow of the investment. Let's understand this with the example below.

There is an investment avenue where if you invest Rs 10 lakhs now, you will receive the cash flow of Rs. 1 lakh for the next 4 years. At the end of the 5th year, you receive Rs. 1 lakh along with the invested amount. Therefore, your IRR will be as follows:

You can quickly compare more investment avenues using IRR. The higher the IRR, the more lucrative is the investment option.

The IRR calculator will help you analyse various investments options available by comparing their IRR. It allows you to choose the best investment option from the list.