When the money returns changes the return.
IRR is the annual discount rate that sets the net present value of a cash-flow sequence to zero. Earlier distributions can increase IRR even if the total investment multiple is unchanged.
This calculator deliberately supports one initial outflow followed by nonnegative annual receipts. That conventional pattern has one finite root whenever at least one receipt is positive. Further capital calls, irregular dates and alternating signs require a different cash-flow model and can introduce multiple or missing roots.
The formula, made clear.
- Annual spacing
- Every receipt occurs at an exact year-end measured from the initial investment.
- Residual value
- If included in the final receipt, the result is an interim marked return, not fully realized performance.
- Total loss
- All receipts zero is displayed as a −100% loss convention; no finite NPV root exists.
Put the numbers in context.
An initial $1,000,000.00 outflow followed by $200,000.00, $300,000.00, $300,000.00 and $1,500,000.00 at years two through five returns 2.3× in total. The solver discounts each receipt from its own year, rather than treating all proceeds as a year-five exit.
| Input | Example value |
|---|---|
| Initial investment at year zero | $1,000,000.00 |
| Receipt at end of year 1 | $0.00 |
| Receipt at end of year 2 | $200,000.00 |
| Receipt at end of year 3 | $300,000.00 |
| Receipt at end of year 4 | $300,000.00 |
| Receipt at end of year 5 | $1,500,000.00 |
| Annual cash-flow IRR | 21.7% |
What this calculation assumes
Exactly annual spacing, one initial outflow, nonnegative subsequent receipts and no later capital calls. Uses monotone bisection in log(1+r) space. This is periodic IRR, not actual-date XIRR. Zero receipts use an explicit total-loss convention.
Methodology references
What to consider next.
Use the two-cash-flow annualized return only when all value arrives at one exit. For actual fund reporting, calculate from the full dated contributions and distributions.
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