What annualised equity IRR does this project produce?
Turn a short equity cash flow into an annualised return: money in at the start, an optional top-up, money back at exit. A first-pass read, not a full project finance model.
Equity in
Equity out
Context (optional)
Scenario matrix
Annualised IRR as exit proceeds and exit timing move. The same profit returned sooner is a higher IRR. The ringed cell is your current inputs.
| Proceeds / timing | −3 mo | On time | +3 mo |
|---|---|---|---|
| Exit -10% | 8.5% | 7.6% | 6.8% |
| Exit Base | 14.0% | 12.4% | 11.2% |
| Exit +10% | 19.2% | 17.0% | 15.3% |
IRR is driven by timing as much as by profit. A first-pass read, not a full monthly project finance model.
Equity IRR estimates the annualised return to equity after accounting for the timing of invested and returned capital. This free Popurise calculator takes the equity invested at the start, an optional top-up, and the equity returned at exit, solves for the monthly IRR by bisection, annualises it, and shows the equity multiple and profit to equity.
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How it works
Equity IRR is the annualised, time-weighted return to equity.
Profit on cost and margin tell you the size of the return. Equity IRR tells you how good it is for the time and money at risk. It is the rate that makes the equity cash flow discount to zero, expressed per year, and it is what capital partners look at first.
The key idea is timing. The same profit returned sooner is a higher IRR. Equity put in later is a higher IRR. Two deals with the same dollar profit can look very different once you account for how long the money was committed.
This calculator screens a short equity cash flow: initial equity, an optional top-up, and the exit. It uses a robust method and handles awkward inputs cleanly, so you never see a broken or impossible return. It is a screen, not a full monthly model.
Worked example
An illustrative Australian project
Example only. Not financial advice.
- Initial equity (month 0)
- $5.0M
- Additional equity (month 6)
- $1.5M
- Equity returned (month 30)
- $8.6M
- Total equity invested
- $6.5M
- Total profit to equity
- $2.1M
- Time to exit
- 30 months
What moves the number
The levers that move it
IRR is driven by timing as much as by profit. The same dollars, moved earlier or later, produce a materially different return.
- 01
Exit proceeds
The money that comes back at exit. More proceeds lift the return directly, before any change to timing.
- 02
Exit timing
The single biggest lever. Bring the exit forward and the same profit becomes a higher IRR, because the money is at risk for less time.
- 03
When equity goes in
Equity contributed later is at risk for less time, which lifts IRR. Front-loaded equity does the opposite.
- 04
How much equity
Less equity for the same return raises the multiple and the IRR. Gearing changes the shape of the equity line.
- 05
The profit itself
A bigger gain to equity lifts both the multiple and the IRR, all else equal. Profit is necessary, but not sufficient.
- 06
Length of the hold
A long program can turn a strong profit into a modest IRR. Time is the denominator the return is measured against.
How to use it
A screen, not the full model
Use this to sanity-check a return once you have a rough cash flow. It is a screen, and it depends entirely on the timing you enter.
To pressure-test a return
When you have a rough sense of equity in, equity out and timing, and you want a quick read on the annualised return.
Timing changes everything
The same profit can be a 12% or an 18% IRR depending on when the money moves. Screen the timing, do not just trust the multiple.
For the real cash flow
When it matters, the equity IRR should come from a full monthly model with debt drawdown, settlements and distributions.
See the softwareThe calculator suite
Four questions, four fast answers
Each calculator answers one question on a site. Together they screen a deal from land price to timed return, before you build the full model.
Questions
Answered
What equity IRR means, why timing changes it, and where the full model takes over.
- What is equity IRR?
- Equity IRR estimates the annualised return to equity after accounting for the timing of invested and returned capital. It is the rate at which the equity cash flow discounts to zero, expressed as an annual figure. It is the number capital partners tend to care about most.
- How is equity IRR calculated?
- Lay out the equity cash flow: money invested at the start, any top-up part way through, and the money returned at exit. Solve for the monthly rate that makes the net present value of that cash flow zero, then annualise it. This calculator uses a robust bisection method and annualises with (1 + monthly IRR) to the power of 12, minus 1.
- Why does timing change IRR?
- IRR rewards capital that is at risk for less time. The same profit returned sooner is a higher IRR, and equity contributed later is a higher IRR, because the return is measured against how long the money was committed. Two deals with identical profit can have very different IRRs.
- Is equity IRR the same as profit on cost?
- No. Profit on cost is a ratio at a point in time and ignores timing. Equity IRR is time-weighted and depends heavily on when money moves. A deal can have a healthy profit on cost and a modest IRR if the capital is tied up for a long time.
- What cash flows should I include?
- The equity cash flow only: the equity you invest at the start, any additional equity and the month it goes in, and the equity returned at exit with its month. Debt, construction spend and revenue matter to the project, but the equity IRR is measured on the equity flows alone.
- Is this a full project finance model?
- No. This is a simple first-pass equity IRR on a short cash flow, not a full monthly project finance model. In a real project the equity flows come out of a full cash flow with debt drawdown, settlement timing and distributions. Use this to screen, then build the real model in Popurise.
Get the IRR from a real cash flow.
Screen the return here, then model the full monthly cash flow, debt and distributions in Popurise. Free right now, no card required.