The IRR Definition

This IRR calculator finds the rate r where NPV = Σ CFₜ/(1+r)ᵗ equals zero — the discount rate at which a project breaks even in present-value terms. It is the standard metric for comparing projects of different sizes and durations.

Newton-Raphson in Action

Starting from 10%, the solver iterates r ← r − NPV(r)/NPV′(r), using the derivative of the present-value sum to leap toward the root. The default example converges to roughly 27% in a handful of iterations.

Reading the Results

Compare IRR to your hurdle rate: above it, the project earns more than your cost of capital. The NPV at your discount rate confirms the decision in dollars — a positive NPV and an IRR above the hurdle should agree.