IRR & NPV Calculator
Solve the Internal Rate of Return (IRR) and Net Present Value (NPV) for irregular multi-period cash flows using the high-precision numerical Secant method.
Cash Flow Timeline
Understanding IRR, NPV, and Capital Budgeting
In corporate finance, WACC (Weighted Average Cost of Capital) and cash flow budgeting determine whether a company should green-light a project. The two primary metrics used for this evaluation are Net Present Value (NPV) and the Internal Rate of Return (IRR).
What is Net Present Value (NPV)?
NPV discounts all future cash inflows and outflows back to their value in today's dollars, subtracting the initial outlay. The discount rate (hurdle rate) represents the cost of capital or required return.
- Positive NPV (NPV > 0): Accept the project. The investment yields returns higher than the hurdle rate and increases shareholder value.
- Negative NPV (NPV < 0): Reject the project. The investment fails to cover the capital costs.
- Zero NPV (NPV = 0): The project breaks even exactly at the cost of capital.
What is the Internal Rate of Return (IRR)?
The IRR is the annualized rate of return that makes the NPV of all project cash flows equal to zero. Rather than assuming an external interest rate, the IRR calculates the project's internal yield. Companies accept projects if the IRR exceeds the firm's Weighted Average Cost of Capital (WACC).
Since the IRR equation is a mathematical polynomial of degree n, solving for it requires numerical approximation. Our calculator implements the Secant Method with a high-precision binary Bisection fallback to guarantee convergence even for irregular and non-normal cash flows.
Does this handle irregular cash flows?
Yes. Our advanced solver handles any non-normal or irregular cash flow pattern, solving for multiple IRR roots and verifying the Net Present Value profiles dynamically.