IRR
Calculate the internal rate of return on a series of cash flows.
Introduction
Who this is for: Investors and analysts comparing returns across investments with different timings.
Why it matters: IRR is the discount rate at which NPV equals zero — effectively the annualised return the investment delivers. It is the standard institutional comparison metric.
Typical scenario: A developer comparing a two-year development against a five-year income investment.
- Using IRR alone on projects of very different sizes — a high IRR on a small investment may create less wealth than a lower IRR on a large one.
- Forgetting IRR assumes interim cash flows are reinvested at the IRR itself, which is often unrealistic.
- Applying it to cash flows that change sign more than once, where multiple IRRs can exist.
Inputs
Cash Flows
Comparison
Analysis
The IRR is 10.23%, against a hurdle of 12% — below hurdle by 1.77 percentage points. The equity multiple is 1.54x.
This analysis provides context, not financial advice. Consult a qualified adviser before making investment decisions.
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Sensitivity
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Live Results
IRR
10.23%
Against Hurdle
Below hurdle
Equity Multiple
1.54x
Total Profit
£272,000