Irr Approximation
Calculator

IRR is the discount rate at which the net present value of a series of cash flows equals zero — essentially the effective annualized return an investment generates given its pattern of inflows and outflows over time.

True IRR generally requires solving a polynomial equation iteratively (since it usually has no simple closed-form solution), so this calculator uses an approximation method to get close to the answer quickly rather than performing full iterative solving, which introduces a small margin of error.

Yes, if the cash flow pattern changes sign more than once (for example, an initial outflow, then inflows, then another outflow), the underlying equation can mathematically have multiple valid solutions, making IRR ambiguous or misleading in those specific cases.

A negative IRR indicates the investment is expected to lose money overall relative to the initial outlay — the cash returned over time doesn't even recover the original investment, let alone provide a positive return.

IRR can favor smaller investments with high percentage returns over larger investments with more total value created, and it implicitly assumes reinvestment of interim cash flows at the IRR itself, which isn't always realistic. Comparing NPV alongside IRR generally gives a fuller picture for decision-making.