How to Calculate the IRR using Numpy

July 23, 2022

Here is a simple template that you can use in order to calculate the IRR using numpy:

import numpy as np
irr = np.irr([initial investment in negative terms, cash flows each year separated by commas])
print (irr)

Steps to calculate the IRR using Numpy

Step 1: Install the numpy package

If you haven’t already done so, install the numpy package using:

pip install numpy

Step 2: Calculate the IRR using numpy

To calculate the IRR using numpy, you’ll need to use this template:

import numpy as np
irr = np.irr([initial investment in negative terms, cash flows each year separated by commas])
print (irr)

Let’s now review an example to see how to use this template in practice.

Imagine that you have the following information about a project:

  • The initial investment is $1700
  • The project is expected to generate:
    • $500 in year-1
    • $750 in year-2
    • $800 in year-3

What is the IRR?

To calculate the IRR using numpy, you’ll need to apply this code in Python:

import numpy as np
irr = np.irr([-1700,500,750,800])
print(irr)

And if you run this code, you’ll get the IRR of 0.09236 (or 9.236%).