Modified Internal Rate of Return (MIRR) measures investment profitability as a percentage, considering:
- Cost of financing negative cash flows
- Realistic reinvestment rate for positive cash flows
- Time value of money across project duration
MIRR provides more accurate returns than traditional IRR calculations.
How to Calculate MIRR
MIRR Formula:
MIRR = (FV / PV)^(1/n) – 1
Where:
- FV = Future Value of positive cash flows
- PV = Present Value of negative cash flows
- n = Number of periods
Future Value (FV):
FV = Σ [Positive Cash Flow × (1 + RR)^(n – i)]
Present Value (PV):
PV = Initial Investment + Σ [Negative Cash Flow / (1 + FR)^i]
Variables:
- RR = Reinvestment Rate
- FR = Financing Rate
- i = Time period
Calculator Inputs
Required Fields:
- Initial investment amount
- Annual cash flows (positive and negative)
- Financing rate (%)
- Reinvestment rate (%)
- Number of years
Output:
- Modified Internal Rate of Return (%)
Example Calculation
Project Data:
- Initial Investment: -$10,000
- Year 1: $6,000
- Year 2: -$4,000
- Year 3: $8,000
- Year 4: $3,000
- Year 5: $7,000
- Financing Rate: 10%
- Reinvestment Rate: 12%
Step 1: Calculate FV of positive cash flows
FV = $6,000(1.12)^4 + $8,000(1.12)^2 + $3,000(1.12) + $7,000 FV = $9,441 + $10,035 + $3,360 + $7,000 = $29,836
Step 2: Calculate PV of negative cash flows
PV = $10,000 + $4,000/(1.10)^2 PV = $10,000 + $3,306 = $13,306
Step 3: Apply MIRR formula
MIRR = ($29,836 / $13,306)^(1/5) – 1 = 17.53%
MIRR vs IRR
| Feature | MIRR | IRR |
|---|---|---|
| Reinvestment assumption | Specified rate | Same as IRR |
| Realism | More realistic | Often overstated |
| Calculation | Single solution | Multiple solutions possible |
| Best for | Comparing projects | Quick estimates |
For this example: MIRR = 17.53%, IRR = 24.38%
When to Use This Calculator
✓ Evaluate investment projects ✓ Compare multiple opportunities
✓ Real estate investments ✓ Business expansion decisions ✓ Capital budgeting ✓ Equipment purchase analysis
Interpreting Results
- MIRR > 0% → Positive returns
- MIRR > Financing Rate → Exceeds cost of capital
- MIRR < 0% → Losing investment
- Higher MIRR → Better investment
Decision Rule: Accept projects where MIRR exceeds your required return rate.
Calculator Benefits
✓ Instant calculations – Get results in seconds ✓ Accurate formulas – Precise mathematical calculations
✓ Free to use – No registration required ✓ Realistic assumptions – Separate financing and reinvestment rates ✓ Easy comparison – Evaluate multiple projects ✓ Mobile friendly – Use on any device
FAQs
What’s a good MIRR percentage? MIRR above 10-15% is generally solid, but it should exceed your cost of capital and alternative investment returns.
Can MIRR be negative? Yes. Negative MIRR means the project loses money and should typically be avoided.
How is MIRR different from IRR? MIRR uses realistic reinvestment rates while IRR assumes reinvestment at the IRR itself, which is often unrealistic.
What reinvestment rate should I use? Use your average portfolio return or prevailing market rates for similar-risk investments.
Related Calculators
Calculate more with Calculator Factory:
- PPM Calculator – Parts per million conversions
- Price per Ounce Calculator – Unit price comparisons
- Glass Weight Calculator – Construction calculations
- Octagon Calculator – Geometric measurements
- Population Growth Calculator – Demographic projections
- 8-Hour Shift Calculator – Time management
- Body Shape Calculator – Fitness measurements
- TV Mounting Height – Installation planning
- Audiobook Calculator – Listening time estimates
- 0-60 Calculator – Vehicle performance
- MG to ML – Unit conversions
- Odds of Having Twins Calculator – Probability calculator