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The same 50,000 project, solved for the rate
Spend 50,000. Collect 15,000 at the end of each year for five years. The rate that makes the present value of those inflows equal 50,000 is the IRR. The comparison hurdle stays at 8 percent so you can see NPV at a rate you already use.
Project outlay: 25% lower
Change project outlay to 37,500 while keeping the other example values the same.
Project outlay: 25% higher
Change project outlay to 62,500 while keeping the other example values the same.
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Quick answer
What does the Project internal rate of return calculate?
What discount rate sets this project’s net present value to zero? This calculator uses project outlay, annual net cash inflow, years of inflows, and comparison hurdle rate to estimate discount rate that sets npv to zero immediately in your browser.
With the values currently entered, the result is 15.2% — internal rate of return. It also shows npv at the hurdle rate, undiscounted total inflows, project outlay, and comparison hurdle rate.
How to use the Project internal rate of return
- Replace the example values with your own numbers.
- Review the result and supporting figures as they update automatically.
- Check the formula and assumptions before using the estimate for a decision.
Inputs used
- Project outlay
- Annual net cash inflow
- Years of inflows — entered in years
- Comparison hurdle rate — entered in %
Project internal rate of return formula
IRR is the annual rate r that sets outlay = annual inflow × [1 − (1+r)^(−n)] ÷ r. NPV at the hurdle uses the same present-value sum.
Assumptions
- DOE project-analysis methodology defines IRR as the discount rate at which net present value is zero.
- Cash goes out once at the start. Equal inflows arrive at the end of each year. Extra outlays later can create more than one IRR and sit outside this solve.
Verify the inputs
Authoritative sources
These sources explain the definitions, factors, or rules behind this tool. Their geographic scope is shown because an official source for one country is not automatically valid somewhere else.
Defines IRR as the discount rate at which net present value is zero, and reports simple payback as the years for savings to offset the outlay.
Compound interestInvestor.gov — US Securities and Exchange CommissionScope: General method; US sourceA plain-language definition of interest earned on principal and accumulated interest.
Annual returnInvestor.gov — US Securities and Exchange CommissionScope: General investor education; US sourceDefines an annual rate of return as the profit or loss on an investment over a one-year period. The holding-period rate is (amount received − amount invested) ÷ amount invested.
Sources do not endorse Calculum. Check the source date, scope, and your own documents before making a financial, tax, insurance, or reporting decision.
Practical guide
Project internal rate of return example and edge cases
Internal rate of return is the discount rate that sets NPV to zero. DOE project-analysis notes use that definition. On this page the cash shape is one outlay, then equal annual inflows.
Example: The same 50,000 project, solved for the rate
Spend 50,000. Collect 15,000 at the end of each year for five years. The rate that makes the present value of those inflows equal 50,000 is the IRR. The comparison hurdle stays at 8 percent so you can see NPV at a rate you already use.
- Project outlay
- 50,000
- Annual net cash inflow
- 15,000
- Years of inflows
- 5 years
- Comparison hurdle rate
- 8 %
Calculated result15.2%internal rate of return
IRR is 15.2 percent. NPV at the 8 percent hurdle is 9,890.65, the same leftover the NPV calculator prints. CAGR cannot replace this figure. CAGR only connects two balances, with no yearly inflow in between.
Example results use the default display profile. The calculator above follows your selected country and units.
How to read the result
- Read IRR first. Then check NPV at the hurdle. If IRR sits above the hurdle, NPV at that hurdle is positive.
- A negative IRR means even a 0 percent discount leaves a hole. Total inflows never cover the outlay.
Edge cases worth checking
You have a second cash outlay in year three
Two sign changes can create two IRRs. Stop and use NPV at a hurdle you trust. This solver assumes cash out once, then inflows.
You compared IRR with CAGR
CAGR turns a start value into an end value. IRR zeros a project NPV. They match only in special cases. Use each page for its own question.
What changes the result most
Project outlay
Use a current amount for project outlay. Include fees or recurring costs that belong in the same figure.
Annual net cash inflow
Use a current amount for annual net cash inflow. Include fees or recurring costs that belong in the same figure.
Years of inflows
Keep years of inflows on the same time basis as the other inputs. Monthly and annual values are easy to mix up.
Try a different scenario
Small changes show whether the answer is stable or sensitive.
Project outlay: 25% lower
37,50028.6%internal rate of return
Project outlay: 25% higher
62,5006.4%internal rate of return
Annual net cash inflow: 25% higher
18,75025.4%internal rate of return
Common mistakes
Check project outlay
DOE project-analysis methodology defines IRR as the discount rate at which net present value is zero. Make sure this matches the number you enter.
Keep comparison hurdle rate consistent
Cash goes out once at the start. Equal inflows arrive at the end of each year. Extra outlays later can create more than one IRR and sit outside this solve. Use the same units and time period throughout the calculation.
Do not rely on one project internal rate of return scenario
Run a cautious case and an optimistic case. The range is often more useful than one exact-looking number.
Use this result well
What discount rate sets this project’s net present value to zero?
It does not replace a quote, contract, accountant, or local employment guidance.