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# IRR Calculator with NPVInternal Rate of Return & Net Present Value

An Internal Rate of Return Calculator (IRR) is used to calculate an investment's bottom line. You can use the results for bragging rights, or more importantly, to compare two or more different investment options. You should also compare the results you get against what you can earn in a risk-free investment to determine the desirability of an investment.

This calculator will calculate both the IRR and Net Present Value (NPV) for a complicated series of cash flows as well as the total invested, total returned and the profit (or loss). It supports both irregular length periods and exact date data entry.

Make sure that you check out the usage tips below (click to scroll).

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#### Info...

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File save and open are new beta test features. If you happen to get a different calculated result, do not assume that this calculator is making an error. Most likely, the problem is with the new file load feature. Please check that all settings got loaded as expected.

## What is internal-rate-of-return?

IRR is an annualized rate-of-return. It is known as an "internal" rate-of-return because the algorithm used does not depend on a quoted interest rate (if there is one). To calculate an IRR, one only needs to know the projected cash flow amounts and dates they are due to occur.

In more nerdy speak, IRR is the discount rate that results in a net present value equal to 0. That is if you calculated the present value (PV) of the cash inflows (investments) and cash outflows (returns or withdrawals) using the IRR, the net would equal 0. More weight is given to the earlier cash flows than to the later cash flows because of the time value of money.

For the investor, the IRR is an essential and sometimes overlooked tool.

By annualizing a rate-of-return, one can compare investment results for two completely different cash flows and then select the better option.

## Why is IRR useful beyond bragging rights?

IRR is a Very Useful Number because it gives the investor the ability to compare investments. That is, the IRR normalizes the results for different cash flows.

Take, for example, two rental properties that are for sale. The offer price for both buildings is about the same. Projected rents are about the same. However, one will have a higher upfront renovation cost while the other has higher property taxes. How does an investor know which purchase represents a better investment?

They can use an IRR calculator to make this determination.

A note of caution. When comparing investments, never make the comparison using internal rates of return calculated with different calculators.

Why is that?

Because two different calculators may calculate the results slightly differently, and neither one of them will necessarily be wrong either. (Consider for a moment that Microsoft Excel has two IRR functions that may calculate different IRRs for the same cash flows.) You don't need to get hung up on this idea. But it is something to be aware of so that you understand how to use the results correctly.

For the record, this calculator calculates the IRR using Newton's method and counting days (some calculators count periods).

## What is net present value?

In finance jargon, the net present value is the combined present value of both the investment cash flow and the return or withdrawal cash flow. To calculate the net present value, the user must enter a "Discount Rate." The "Discount Rate" is your desired rate-of-return (ROR).

## How is NPV useful?

The NPV is the calculation investors use to learn if they are paying too much for an investment (or if they could pay more) relative to the rate of return they want to earn. If the net present value is negative, the initial investment is too high for the investor to meet their goal ROR. If the NPV is positive, the investor can pay that amount more for the investment, and they'll still earn what they want to earn.

Here's an example...

Jack invests in already issued mortgages. Jack can buy a mortgage for \$190,000 that has 210 remaining monthly payments of \$1,235.90 each. The next payment is due on June 1. Jack wants to earn 6% on his investments.

Is this a good deal for Jack?

1. Enter -190,000.00 for the "Initial Investment"
2. Set "Initial Investment Date." In this case, that's the date Jack plans to purchase the mortgage. Use May 22 to follow along.
3. Click on "Add Series." Create 210 monthly entries of \$1,235.90, starting on June 1.
4. Enter Jack's personal "Discount Rate," i.e., 6% — the ROR he wants to earn on his investments.
5. Click "Calc"
6. IRR = 3.847%
7. NPV = -\$27,198.22

At 3.8%, Jack will not earn the 6% he desires.

What is Jack to do?

The NPV calculation is useful here. It tells Jack that he is paying \$27,198.22 too much for the investment. See for yourself. Change the "Initial Investment" to \$-162,801.78 (\$190,000.00 - \$27,198.22) and click "Calc" again. Now we have:

• IRR = 6.0%
• NPV = 0.0

Jack is now a happy man assuming he can negotiate the price he needs.

Note: When the NPV is positive, that is the amount the investor can increase the initial investment by and still receive the desired ROR.

### More Details

Users should find these recent enhancements useful:

• "Add Series" option. Create repeated cash flows easily. Work with hundreds of cash flows without manual entry.
• Creating entries with "Add Series" does not populate the existing dates with values or reset the current values. It creates NEW entries. If a cash flow entry exists on July 1, and you then use the "Add Series" feature to add monthly cash flows starting on June 1, you'll have two entries for July 1.
• "Add Series" feature can be used to add additional "0" entries that you can manually edit. There is no longer a restriction to 96 inputs.
• Use the "Remove 0's" feature to be left with a lean look.
• Save feature! - save the custom URL in a document, on your desktop as a shortcut, or email it to yourself and then use it the next time to reload all your cash flows.
• Now prints all cash flows.
• Reset is similar to a clear feature. Besides clearing the cash flows, it also changes the dates to start from the "First Cash Flow Date" and increments them by "Cash Flow Frequency."
• Optionally removes zero entries so as not to print.
• Net Present Value Calculation - NPV
• Dates created from "First Cash Flow Date" not "Initial Investment Date."

### Calculator usage and tips

• Zero amounts have no impact on the IRR result. If you set the frequency to "Monthly," and there are only four cash flows in a year, you may leave eight initialized to 0. The same applies to 0 amounts after you've entered the final liquidation value.
• Enter the investment's current or final value as the last cash flow. If you are calculating the IRR for a stock or mutual fund, and you still own the investment, you should enter the investment's value as the last amount.
• You do not need to enter cash flows in date order. The calculator will sort them before calculating the result. This feature is handy, of course, if you realize that you missed entering a cash flow. Enter the amount in any available cell. Then change the date associated with that cell. Click "Calc" to sort.
• If you mistakenly duplicate a cash flow, set one of the duplicates to "0".
• Changing the "First Cash Flow Date" will reset the dates without clearing the values you've entered.
• Depending on the order you use "First Cash Flow Date," "Remove 0's" and "Add Series," the "First Cash Flow Date" may not be the first date in the input area. This is not a bug. Changing "First Cash Flow Date" initializes a series starting on the date selected. However, the user can change the date, or it can be removed with "Remove 0's" if the value for the start date is 0. Finally, a user can insert a series with a date before "First Cash Flow Date."
• Calendar Tip: When using the calendar, click on the month at the top to list the months, then, if needed, click on the year at the top to list years. Click to select a year, select a month, and select a day. Naturally, you can scroll through the months and days too. Or you can click on "Today" to quickly select the current date.
• If you prefer not using a calendar, single click on a date or use the [Tab] key (or [Shift][Tab]) to select a date. Then, as mentioned, type 8 digits only - no need to type the date part separators. Also, because the date is selected, you do not need to clear the prior date before typing. If your selected date format equals mm/dd/yyyy, then for Dec. 1, 2016, type 12012016.
• And don't stress out: you do not need to enter the cash flows in date order. You have a computer. It and this calculator are smart enough to sort the cash flows for you once you've clicked the "Calc" button.

## 47 Comments on “Irr Calculator”

Join the conversation. Tell me what you think.
• ##### Jayceesays:

What does “wave Browser” have to do with your IRR Calculator which I would like to purchase?

• ##### Karlsays:

Where do you see "wave Browser?" I don’t know what that’s referring to. Perhaps you are looking at an ad on the page?

And by the way, the IRR calculator is free. There is no need to purchase anything.

• ##### Dawn Jonessays:

I am trying to provide a rate of return for a quarterly investments report. We periodically make deposits and withdrawals. Is this the calculator I should use? If so, do I also enter the interest earned as a cash flow?

• ##### Karlsays:

Yes, you would use the IRR calculator. No, the interest rate is not a cash flow. The annualized rate of return (IRR) is calculated from the actual cash flows paid out or received. If you check out this page, there are a couple of examples. After reviewing them, if you have any other questions, just ask.

• ##### Natesays:

Can this calculator be used with a plugin or with HTML on a website we’ve built for a client?

• ##### Karlsays:

No. I offer 7 WordPress plugins here.

• ##### Jack Cassidysays:

I have a couple of questions. 1) I use a very old version of this IRR product that I beleive I purchased for \$5 and loaded onto a Windows friendly computer that I now keep only for purposes of running that program. I obviously believe it is an indispensible tool and I have looked high and low for one that is as good without success. In my earlier version of this program there is a column on the spread sheet that allows for me to enter comments that do not factor into the calculation i.e., “sold 7 Febraury 18, 50 strikes for \$1.40.” I can’t see where this online version of the product allows for the input of commentary or notes. What am I missing. 2) I love the old program I purchased a million years ago. Is it possible to transfer the program and data files from my old computer to a new Windows friendly device? As I vaguely recall, when I purchased the Windows friendly computer I now run IRR on (ten years ago maybe). I simply paid another \$5 to PGS to get a new program disk. Thanks for your help. I’ve used your tool weekly for many, many years and it is simply the best. I don’t know how I could acccurately judge the return on my investmetns without it.

• ##### Karlsays:

Currently, the online version does not allow users to make a comment on a cash flow (as you have discovered). I have plans to add that feature, but I’m not sure when it will happen.

I had forgotten that the calculator was sold separately for a short time in the past. That is no longer the case.

To get a copy of the calculator, that will run on the latest version of Windows, you can purchase SolveIT!. SolveIT! has over 50 calculators it is available for a one-time fee of \$69.95.

• ##### Jacksays:

Thanks so much.  I bought the package you suggested and the IRR calculator is perfect (it has my needed description column).  I loaded it on the cheapest Windows friendly computer I could find (\$200) and it runs much better than it did on my ten year old desk top which will soon be headed to the Goodwill.  I don’t think I would ever have found a suitable program replacement for my old version of IRR without your help.  I’d buy you a beer if I could.  Thanks again.

• ##### Karlsays:

Thank you for letting me know. And I think you just did buy me SEVERAL beers. 🙂

• ##### stevesays:

I have made made different investment amounts on different dates over the years in a mutual fund. I would like to calculate the average annual rate of return on my investment from the start and not sure how to do it with your financial calculators. i have dates and amounts of each deposit into the mutual fund and the ending value of the account. i assumed i would enter deposits amounts with respective dates then enter withdraw of total account value on the current date amount (account value) with interest rate to be the calculated factor. I started the investments back in 2001. can you help with any suggestions?

• ##### Karlsays:

I think you have the right calculator for what you want to do.

Do you have any specific questions? Have you tried the calculator with a few investments and you are having problems understanding the results?