The Internal Rate of Return is a financial metric used to estimate the profitability of potential investments. It is the discount rate at which the Net Present Value (NPV) of all cash flows (both positive and negative) from a single project or investment equals zero. In simpler terms, IRR is the expected compound annual rate of return that an investment will generate.

The IRR is typically compared to a company’s hurdle rate or required rate of return. A simple decision rule is:

• If IRR > Hurdle Rate: The project is considered a good investment and is expected to be profitable. Accept the project.
• If IRR < Hurdle Rate: The project is not expected to generate sufficient returns to meet the minimum requirement. Reject the project.
• If IRR = Hurdle Rate: The project is expected to break even. The decision to proceed may depend on non-financial factors.

This calculator provides a theoretical value for informational purposes ONLY and is not financial advice.

The IRR calculation assumes that all positive cash flows are reinvested at the IRR rate itself, which may not be realistic. The model may also produce multiple or no solutions for non-conventional cash flows (e.g., multiple sign changes). Always conduct a thorough financial analysis and consult with a qualified financial advisor before making any investment decisions.