MIRR Calculator

Category: Investment
- April 24, 2025
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Modified Internal Rate of Return (MIRR) Calculator

Calculate the Modified Internal Rate of Return (MIRR) for an investment, taking into account different rates for reinvestment of positive cash flows and financing of negative cash flows.

MIRR provides a more realistic measure of an investment's profitability compared to traditional IRR by considering the actual rates at which cash flows are reinvested or financed.

Investment Information

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Rate at which negative cash flows are financed
%
Rate at which positive cash flows are reinvested

Cash Flows

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Display Options

About Modified Internal Rate of Return (MIRR)

The Modified Internal Rate of Return (MIRR) is a financial measure of an investment's attractiveness. It addresses some limitations of the traditional Internal Rate of Return (IRR) by explicitly considering the reinvestment rate of positive cash flows and the finance rate of negative cash flows.

Advantages of MIRR over IRR
  • Realistic Reinvestment Assumption: IRR assumes all cash flows are reinvested at the IRR itself, which may be unrealistic. MIRR allows you to specify a more realistic reinvestment rate.
  • Avoids Multiple IRR Problem: Traditional IRR can sometimes yield multiple valid rates for the same cash flow series. MIRR always provides a single, unique solution.
  • Financing Cost Consideration: MIRR accounts for the cost of financing negative cash flows, making it more realistic for real-world scenarios.
  • Better for Comparing Investments: MIRR often provides a more accurate basis for comparing mutually exclusive investment opportunities.
When to Use MIRR
  • When evaluating long-term capital investment projects
  • When comparing multiple investment opportunities
  • When cash flow patterns include both positive and negative values after the initial investment
  • When you have specific reinvestment or financing rates that differ from the project's internal return
  • When traditional IRR analysis yields multiple rates or unrealistic results
Formula:
MIRR = \( \left(\frac{\text{Terminal Value}}{|\text{Present Value of Negative Flows}|} \right)^{\frac{1}{n}} - 1 \)

What Is the MIRR Calculator?

The Modified Internal Rate of Return (MIRR) Calculator is a financial planning tool that helps evaluate the profitability of an investment by considering more realistic financial conditions. Unlike traditional IRR, which assumes all cash flows are reinvested at the internal rate itself, MIRR uses two separate rates: one for reinvesting positive cash flows and another for financing negative ones. This provides a clearer picture of your investment's actual potential.

Why Use the MIRR Calculator?

This tool is especially useful for:

  • Evaluating long-term projects with irregular cash flows
  • Comparing multiple investment options with different cash flow patterns
  • Creating a financial forecast using realistic reinvestment and financing rates
  • Making informed decisions about portfolio growth and investment planning

As a future value tool and investment analysis aid, it can improve the accuracy of your portfolio projections and support better return on investment decisions.

How to Use the MIRR Calculator

Follow these simple steps to calculate your Modified Internal Rate of Return:

  1. Enter Finance Rate: Input the rate you would pay to finance any negative cash flows (e.g., initial investment costs).
  2. Enter Reinvestment Rate: Input the rate at which you can reinvest your positive cash flows.
  3. Add Cash Flows: Include your initial investment (typically negative) and add projected cash flows for each year.
  4. Optional Settings: Choose how many decimal places you want in the results, show calculation steps, or compare the MIRR with the traditional IRR.
  5. Click "Calculate MIRR": View the results instantly, including a clear comparison between MIRR and IRR, plus a breakdown of steps and a visual chart of your cash flow timeline.

What the Results Tell You

After calculation, you will see:

  • MIRR: Your investment’s realistic annual return rate
  • Traditional IRR: Provided for comparison if selected
  • Difference: The gap between MIRR and IRR, helping you understand how realistic assumptions can change your analysis

This calculator is also a valuable addition to your investment planner or interest compounding tool, helping you make more informed decisions using detailed financial data.

Frequently Asked Questions (FAQ)

What does MIRR stand for?

MIRR means Modified Internal Rate of Return. It's a more accurate way to measure an investment’s profitability by accounting for real-world reinvestment and financing rates.

How is MIRR different from IRR?

IRR assumes all cash flows are reinvested at the same rate, which can be unrealistic. MIRR uses two distinct rates, offering a more practical and unique solution without the possibility of multiple IRR values.

Can I use this for any type of investment?

Yes. Whether you’re planning a real estate purchase, launching a new project, or evaluating a business proposal, the MIRR calculator helps analyze expected investment returns under real-world financial conditions.

Is this the same as a compound interest calculator?

No, but they are related. While a compound interest calculator focuses on interest growth over time, the MIRR calculator also takes into account cash inflows and outflows, making it more comprehensive for investment planning and portfolio growth.

Who should use this calculator?

This tool is useful for individual investors, financial planners, business owners, and anyone who needs a reliable future value estimate, return analysis tool, or investment returns guide.

Why It Matters

Using the MIRR calculator can help you project future investment value with greater accuracy, make better budgeting decisions, and develop a reliable financial forecast. It supports you in turning raw numbers into real insights, enhancing your confidence in every financial decision.