Internal Rate of Return (IRR) Calculator
Understanding IRR
What is IRR?
Internal Rate of Return (IRR) is a metric used to estimate the profitability of potential investments. It's the discount rate that makes the net present value (NPV) of all cash flows equal to zero.
When to Use IRR
- Comparing different investment opportunities
- Evaluating project profitability
- Making capital budgeting decisions
- Analyzing real estate investments
Interpreting IRR Results
- IRR > Cost of Capital: Investment may be worthwhile
- IRR < Cost of Capital: Investment may not be worthwhile
- Higher IRR: Generally indicates better return potential
- Multiple IRRs: Possible with unusual cash flow patterns
Compare IRR with your required rate of return or cost of capital to make investment decisions.
Advertisement Space
Investment Tips
- Consider all cash flows
- Account for timing of payments
- Compare with other metrics
- Use realistic projections