IRR Calculator: Easy Tool to Calculate Investment Returns

Key takeaways:
 

• With the help of internal rate of return (IRR), you can find the annual profit rate of an investment in a very easy way.
   
• With the help of this, investors can easily compare the different investment options and choose the best one which will give them the higher profit. 
   
• With the help of IRR calculator, you will not have to solve the complex formulas manually; as a result, the calculation mistakes will be reduced and it will also save the time. 
   
• The higher IRR indicates a better investment, but the lower IRR indicates the investment is not very profitable.

 
Just imagine that you are investing 1,00,000 lakh today and after few years it has become 1,80,000. Surprised right? But the question that arises here is that how much did your investment actually grow over the year? To find the answer of this question, internal rate of return or IRR becomes a very useful tool. With the help of IRR tool, you can easily find the yearly return percentage of the investment without even doing the complicated calculations. 

It doesn't matter if you are investing in business projects, mutual funds or real estate, the IRR calculator will help you clearly understand that how profitable your investment can become. In this whole blog, we will understand what the IRR is in a very simple terms and with that, the real estate examples and some of the important topics that can help you make the better investment decisions.

What is the meaning of Internal Rate of Return (IRR)?

the IRR, shows you the yearly return percentage an investment gives over time. With the help of IRR tool, investors can quickly find the return without doing complicated math calculations. A higher IRR indicates a better investment, but on the other hand, a lower IRR will be not very profitable.

Why do I even need an IRR calculator? Is it important? 

Yes it IRR calculator is very important because it helps you make better financial decisions. The following are the reasons why you should use it:
 

• It will help you to  compare multiple investment options
• It  will give a realistic annual return rate
• It works best for long-term projects
• IRR is widely used in real estate and business planning
• It will save your  time and reduce calculation errors

If you are an investor, then using the internal rate of return financial calculator is very important. 

To calculate the IRR, you need to use a formula. This formula is based on Net Present Value (NPV).

Formula to calculate IRR

0=NPV=t=1∑n​(1+r)tCt​​−C0​

Where:

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I know what you are thinking. This formula is not easy at all to solve. But don’t worry, you can use the internal rate of return formula calculator online.

The IRR calculator will do all the calculations for you without making any errors. The IRR calculator formula finds the rate at which the present value of all future cash flows becomes equal to the initial investment.

IRR Calculator Example 

You must have some doubts regarding IRR. Let's clear the doubts with an easy example. 

In the following table, investment details are mentioned:

When you enter all these values into an IRR calculator, the IRR calculated will be 18%. This means your investment gives an average return of 18% per year.

That's why using an internal rate of return financial calculator is very beneficial for serious investors for planning. 

IRR Calculator Real Estate

In the real estate field, IRR is mostly used. 
 

An IRR calculator for real estate helps investors calculate returns from:
 

• Rental income
• Property appreciation