Calculate the Internal Rate of Return (IRR) for any series of cash flows — evaluates the profitability of investments, projects, and business decisions.
Enter each cash flow by period. Year 0 is typically the initial investment (negative).
The Internal Rate of Return (IRR) is the annualised rate of return that makes the
Net Present Value (NPV) of all cash flows equal to zero. It is one of the most
widely used metrics in capital budgeting and investment analysis.
IRR benchmarks for startup investments, venture capital, and private equity — and how to interpret IRR alongside MOIC and payback period.
IRR (Internal Rate of Return) benchmarks vary by stage, sector, and asset class.
Here is what investors consider "good" across different contexts.
IRR benchmarks by context
Context
Minimum acceptable IRR
Target IRR
Angel / pre-seed
30%
50–100%+
Series A / VC
25%
40–60%
Growth equity
20%
30–40%
Private equity buyout
15%
20–30%
Real estate development
12%
18–25%
Public market hurdle
8–12%
—
IRR vs. MOIC
IRR is time-sensitive: a 3× return in 2 years = ~73% IRR; a 3× return in 6 years = ~20% IRR.
MOIC (Multiple on Invested Capital) ignores time, so investors use both:
- IRR to compare investments with different holding periods
- MOIC to communicate magnitude of return to LPs
When IRR misleads
IRR assumes reinvestment at the same rate. For investments with large early cash flows
(e.g. quick dividends), IRR overstates the blended return. Use MIRR (Modified IRR)
when reinvestment rate differs materially from the project IRR.
Use the IRR calculator to compute IRR and NPV for any
cash flow series.
How to Calculate IRR in Excel (Formula + Examples)
Step-by-step guide to using Excel's IRR function — including the formula, required inputs, common errors, and when to use XIRR instead.
Excel's IRR function is the fastest way to calculate Internal Rate of Return
for conventional cash flows. Here is how to use it correctly.
Excel IRR syntax
=IRR(values, [guess])
values: a range containing the cash flows (must include at least one negative
and one positive value). Year 0 (initial investment) should be the first cell.
guess: optional starting guess for the iteration (default 0.1 = 10%).
Only needed if IRR returns #NUM! or you expect an unusual result.
IRR and NPV can disagree on which of two projects is better — here's why, and which metric to trust when they conflict.
IRR and NPV are built from the same cash flows and usually agree on whether a single
project is worth doing — but when comparing two mutually exclusive projects, they can
rank them in opposite order, and knowing which to trust matters.
What each one actually measures
NPV answers "how much value, in today's dollars, does this project create?" — an
absolute dollar figure.
IRR answers "what annualized rate of return does this project generate?" — a
percentage, independent of project size.
Why they can disagree
IRR is scale-blind. A project requiring $10,000 that returns 50% IRR generates far less
total value than a project requiring $1,000,000 that returns 20% IRR — but IRR alone
would rank the smaller project "better." NPV, by contrast, captures the actual dollar
value created, which is what a business ultimately cares about.
A worked comparison
Project
Investment
IRR
NPV (at 10% discount rate)
A
$10,000
45%
$4,200
B
$500,000
22%
$85,000
Project A "wins" on IRR. Project B creates 20× more actual value. If you can only choose
one and have the capital available, Project B is very likely the better choice despite
the lower IRR — this is exactly the trap IRR-only decision-making falls into.
When IRR is still the right primary metric
Capital-constrained screening: when you're choosing among many small projects and
capital (not a single go/no-go decision) is the binding constraint, IRR-based ranking
to maximize return per dollar deployed can be the right approach
Communicating with non-technical stakeholders: a percentage is often more intuitive
to discuss than a dollar NPV figure, especially for comparing to a hurdle rate
The standard recommendation
Use NPV as the primary decision criterion when comparing mutually exclusive projects of
different sizes — it directly measures value created. Use IRR as a secondary sanity check
and for communicating expected annualized return, but don't let it override NPV when the
two disagree on ranking.
Frequently asked questions
What if a project has multiple IRRs?
This happens when cash flows change sign more than once (e.g., a large cost partway
through the project). NPV remains well-defined in this case, which is another reason to
default to NPV when the two conflict or when IRR looks unstable.
Does MIRR fix the disagreement between IRR and NPV?
MIRR fixes IRR's unrealistic reinvestment assumption but doesn't fix the scale-blindness
problem — NPV is still the metric to trust for ranking projects of different sizes.
Use the IRR Calculator alongside your own NPV calculation to
see both metrics for the same cash flow series before deciding between projects.