Calculate Internal Rate of Return and Net Present Value for any project. See the NPV profile chart, accept/reject verdict vs hurdle rate, and sensitivity table.
Quick Templates
Cash Flows Year 0 = initial investment (negative). Years 1-n = net cash inflows.
NPV(r) = Σ CFₜ / (1+r)^t | IRR = r where NPV = 0 Accept if IRR > Hurdle Rate | NPV > 0 at hurdle rate means project adds value
NPV Profile — Net Present Value at Different Discount Rates
Cumulative Cash Flow — Payback Visualized
📈 NPV Sensitivity at Different Rates
Discount Rate
NPV
vs Hurdle
Decision
ⓘ IRR assumes equal annual cash flows at year-end. For irregular dates use the XIRR calculator. IRR may not exist or may be multiple for non-conventional cash flows (sign changes >1). Always use NPV alongside IRR for capital budgeting decisions.
Frequently Asked Questions
What is IRR? +
IRR is the discount rate that makes NPV of all cash flows = 0. It's the annualised effective return of a project. Accept if IRR > your required return (hurdle rate). Formula: 0 = CF₀ + CF₁/(1+IRR) + CF₂/(1+IRR)² + ... Solved iteratively — no closed form.
What is the difference between IRR and NPV? +
NPV = present value of all cash flows at your chosen discount rate. IRR = rate at which NPV = 0. NPV > 0 when discount rate < IRR. For mutually exclusive projects, prefer NPV (it measures actual value created in rupees). IRR is better for go/no-go on a single project.
What is a good IRR for a project in India? +
Real estate: 12-18%. Infrastructure: 12-15%. Business ventures: 20-30%+. MSME lending: 15-25%. Listed equity: 12-15% long-run CAGR. A project with IRR barely above your borrowing cost (say 11% IRR vs 10% loan) is marginal — the risk premium may not be worth it.
How is IRR calculated? +
Newton-Raphson iteration: Start rate = 10%. Compute NPV and its derivative. Update rate = rate − NPV/dNPV. Repeat until |NPV| < 0.000001. Same as Excel IRR function. IRR requires equal-interval (annual) cash flows. Use XIRR for irregular dates.
What are limitations of IRR? +
1) Assumes reinvestment at IRR rate (usually optimistic). 2) Multiple IRRs possible with alternating cash flow signs. 3) Scale problem: lower IRR project can have higher NPV. 4) Doesn't account for project size. Use MIRR (Modified IRR) to address reinvestment assumption.
When should I use XIRR instead of IRR? +
Use XIRR when cash flows occur at irregular dates (SIP, real estate with irregular payments). Use IRR when cash flows are at equal annual intervals (Year 0, Year 1...). For mutual fund SIP returns, always use XIRR. XIRR is a superset of IRR.