Transparent method
The formula
Worked example
Example inputs
How to interpret the result
MIRR addresses a specific known weakness in standard IRR, the assumption that interim cash flows get reinvested at the same rate as the project's own IRR, an assumption that's often unrealistic, by instead requiring an explicit, separately chosen reinvestment rate that can be set to something more realistic for the actual situation.
Before you rely on it
What to check
Choose a reinvestment rate for MIRR that reflects a genuinely realistic rate available for reinvesting interim cash flows, not an optimistic assumption chosen to flatter the result.
The common error
Where people go wrong with MIRR calculator
Using an unrealistically high reinvestment rate assumption in a MIRR calculation to produce a more favorable-looking result. The whole point of MIRR over standard IRR is a more disciplined, realistic reinvestment assumption, and undermining that with an optimistic guess defeats its purpose.
Sensitivity evidence
How present value of negative cash flows changes the modified internal rate of return
| Present value of negative cash flows | Modified internal rate of return | Net future cash value |
|---|---|---|
| $8,000 | 15.6% | $8,500 |
| $9,000 | 12.9% | $7,500 |
| $10,000worked example | 10.5% | $6,500 |
| $11,000 | 8.4% | $5,500 |
| $12,000 | 6.6% | $4,500 |
Every input, tested
Which input moves the modified internal rate of return most
| Input | Tested from | To | Modified internal rate of return at each end | Swing |
|---|---|---|---|---|
| Future value of positive cash flows | $14,850 | $18,150 | 8.2% to 12.7% | 4.4% (42%) |
| Project length | 4.0 years | 6.0 years | 13.3% to 8.7% | 4.6% (44%) |
| Present value of negative cash flows | $9,000 | $11,000 | 12.9% to 8.4% | 4.4% (42%) |
Two variables at once
Modified internal rate of return by present value of negative cash flows and future value of positive cash flows
| Present value of negative cash flows \ Future value of positive cash flows | $13,200 | $16,500 | $19,800 |
|---|---|---|---|
| $8,000 | 10.5% | 15.6% | 19.9% |
| $9,000 | 8.0% | 12.9% | 17.1% |
| $10,000 | 5.7% | 10.5% | 14.6% |
| $11,000 | 3.7% | 8.4% | 12.5% |
| $12,000 | 1.9% | 6.6% | 10.5% |
Step by step
The worked example, input by input
| Input | Value used |
|---|---|
| Present value of negative cash flows | $10,000 |
| Future value of positive cash flows | $16,500 |
| Project length | 5.0 years |
| Modified internal rate of return | 10.5% |
| Net future cash value | $6,500 |
Where the inputs come from
Present value of negative cash flows is the money invested, discounted to today at your financing rate. Future value of positive cash flows is the inflows compounded forward to the end at your reinvestment rate. Project length is in years. Compute the two values from your own cash flow schedule first; this calculator takes the totals, so it does not itself apply a finance or reinvestment rate.
When the result stops applying
The answer depends on the reinvestment and finance rates you chose to build the two totals, so a different assumption changes the result. MIRR is a single number that summarizes the whole project and hides the shape of the cash flows. It is not commonly reported by brokerages, so you may need to compute the inputs manually.
What to compare it with
Compare MIRR with the IRR and NPV for the same cash flows to see how much the reinvestment assumption matters. If MIRR falls well below IRR, the project's appeal depends on reinvesting at very high rates. The CAGR calculator gives the same math for a single beginning and ending value.
People also ask
Frequently asked questions
Why use MIRR instead of IRR?
MIRR assumes reinvestment at a realistic rate and finance costs at your borrowing rate, which avoids the inflated results IRR can give for high-return projects.
What rates should I use to build the inputs?
Use your cost of capital for financing outflows and a conservative market return, such as a bond or index-fund rate, for reinvesting inflows.
Is MIRR always lower than IRR?
Not always, but it is usually lower when the IRR is high and reinvestment is assumed at a lower rate.