When does IRR give misleading results?

IRR assumes interim cash flows are reinvested at the IRR rate, which is unrealistic for high-IRR projects. Use MIRR for a more realistic reinvestment assumption. IRR also fails for non-conventional cash flows with multiple sign changes.

Relative to the hurdle rate. If WACC is 8% and IRR is 15%, the project adds significant value. In private equity, target IRR is typically 20-25%+.

Can a project have multiple IRRs?

Yes. Any project with more than one sign change in cash flows can have multiple mathematically valid IRRs. This is common in mining or environmental cleanup projects.

Internal Rate of Return (IRR) Calculator

Calculate the discount rate at which NPV = 0. IRR is compared to the hurdle rate (WACC); accept projects where IRR > hurdle rate. Uses iterative numerical solution.

Principal ($)

Annual Rate (%)

Years

Compounding / Year

$ Finance Disclaimer: These calculators are for educational and illustrative purposes only. Results do not constitute financial advice. Consult a licensed financial advisor before making investment or borrowing decisions.

How to Use

Enter the values for the scenario you are assessing. Calculate the discount rate at which NPV = 0. IRR is compared to the hurdle rate (WACC); accept projects where IRR > hurdle rate. Uses iterative numerical solution. Use the irr calculator result to inform your calculation.

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Internal Rate of Return (IRR) Calculator

How to Use

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Frequently Asked Questions

When does IRR give misleading results?

What is a good IRR?

Can a project have multiple IRRs?