Investment return analyser
The return on an investment as a yearly rate, a multiple of the money put in and a value in today's dollars, for a simple investment or for any dated cash flows.
Results
A worked example from the inputs shown. With JavaScript switched on, the results change as you change the inputs.
Internal rate of return, a year
10.26%
The discount rate at which the cash flows net to zero
Multiple of money invested
1.55x
All received in cash
Net present value at 8.0%
$48,095
Above zero: it beats 8.0% a year
Gain
$275,000
Received $775k less invested $500k
Payback
5.0 years
When cash received repays cash put in
Total invested
$500,000
Over 5.0 years
Income yield, first year
7.00%
Income over the amount put in
Over 5.0 years, $500,000 put in returns $775,000, 1.55x the money and a gain of $275,000.
The internal rate of return is 10.26% a year: the discount rate at which the money in and out nets to zero. At your 8.0% the net present value is $48,095, so the investment does better than that rate.
The IRR assumes money received could be reinvested at the same rate, and it ignores how much is invested and for how long: a high IRR over a short time can make less money than a lower one over longer. Read it with the multiple and the net present value.
- Running total of cash
Show the figures
| Cash in and out | Running total of cash | |
|---|---|---|
| Start | −$500k | −$500k |
| Year 1 | $35k | −$465k |
| Year 2 | $35k | −$430k |
| Year 3 | $35k | −$395k |
| Year 4 | $35k | −$360k |
| Year 5 | $35k | −$325k |
| Sale, year 5 | $600k | $275k |
Show the figures
| Discount rate, a year | Net present value |
|---|---|
| 0.0% | $275k |
| 2.0% | $208k |
| 4.0% | $149k |
| 6.0% | $96k |
| 8.0% | $48k |
| 10.0% | $5.2k |
| 12.0% | −$33k |
| 14.0% | −$68k |
| 16.0% | −$100k |
| 18.0% | −$128k |
| 20.0% | −$154k |
Scenarios
Keep the base case and try other assumptions beside it. Each scenario starts from the base case and keeps only the inputs you change in it.
The cash flows
7 cash flows
| When | Amount | Type | Years from the start | Cash to date | Discount factor | Value today |
|---|---|---|---|---|---|---|
| Start | −$500,000.00 | Cash | 0.00 | −$500,000 | 1.0000 | −$500,000 |
| Year 1 | $35,000.00 | Cash | 1.00 | −$465,000 | 0.9259 | $32,407 |
| Year 2 | $35,000.00 | Cash | 2.00 | −$430,000 | 0.8573 | $30,007 |
| Year 3 | $35,000.00 | Cash | 3.00 | −$395,000 | 0.7938 | $27,784 |
| Year 4 | $35,000.00 | Cash | 4.00 | −$360,000 | 0.7350 | $25,726 |
| Year 5 | $35,000.00 | Cash | 5.00 | −$325,000 | 0.6806 | $23,820 |
| Sale, year 5 | $600,000.00 | Cash | 5.00 | $275,000 | 0.6806 | $408,350 |
| Total | $275,000.00 | $48,095 |
The full schedule, repayment by repayment, is in the downloads.
Download
The inputs, results and schedules of the scenario on screen. Files are made in your browser; nothing is sent anywhere.
What it does
Enter what was put in, what came back each year and what the investment returns at the end, and the analyser works out the internal rate of return, the net present value at your discount rate, the multiple of money and how long cash received takes to repay the cash put in.
In Professional mode you can enter dated cash flows instead: several contributions, irregular distributions and a closing valuation. Dates are counted in actual days over a 365 day year, the convention spreadsheets use for XIRR.
Understanding your results
- Internal rate of return
- The yearly discount rate at which the money in and the money out net to zero. It is the most quoted measure of return, but it assumes cash received could be reinvested at the same rate, and it says nothing about how much money was made.
- Net present value
- What the cash flows are worth today, less what they cost, at your discount rate. Above zero, the investment beats that rate; below zero, it falls short of it.
- Multiple of money
- Everything received, and anything still held at a valuation, divided by everything put in. The part received in cash is realised; a valuation is not cash until the investment is sold.
- Payback
- When the cash received has repaid the cash put in. It ignores what comes afterwards and the time value of money, but it shows how long the money is at risk.
- When IRR misleads
- If cash flows change sign more than once, such as money put in, money back and then more put in, there can be more than one IRR, or none. The analyser lists every one it finds and points you to the net present value instead.
The method
How this is calculated
Money put in is negative and money received positive. For each cash flow on date d, with d0 the earliest date and r the discount rate:
Years from the start t = (d − d0) ÷ 365
Net present value = Σ amount ÷ (1 + r)^t
IRR = the rate at which the net present value is zero
Multiple = (cash received + valuation) ÷ money put in
Payback = when the running total of cash first reaches zero
The search for the IRR covers every rate from −99.9% to 10,000% a year on a fine grid, and refines each change of sign by bisection, so it finds every IRR in that range rather than the first one a spreadsheet's guess leads to. With one amount in and one out, the annualised return, (out ÷ in)^(1 ÷ years) − 1, equals the IRR.
A valuation counts in the IRR, net present value and multiple as if received on its date, but not in payback, which counts cash only. Payback is interpolated between the dates either side. In the simple entry, years are exactly 365 days apart and income arrives at the end of each year. See How the tools work.
Assumptions and limitations
The defaults are an illustration: $500,000 invested, $35,000 of income a year for five years and $600,000 back at the end, discounted at 8% a year. The dated example is invented to show a follow-on contribution, distributions and a closing valuation; it is not an investment of ours or of anyone else.
Returns here are before tax and before any fees you do not enter. A valuation is an estimate until the investment is sold, and past returns do not tell you future ones. This is general information, not financial advice, and it does not rate or recommend any investment.
Learn more
- Beyond the balance sheet: what we look for in a business before we invest.
- The business valuation estimator, for the price at either end of an investment.
- The commercial property analyser, which works out the return on a property with and without a loan.
- The acquisition funding planner, for the return on equity in a business bought with debt.