MIRR Calculator

What Is Modified Internal Rate of Return (MIRR)?

The Modified Internal Rate of Return (MIRR) is a capital budgeting metric that improves on the traditional internal rate of return (IRR). It separates two key ideas that IRR blends together: the cost of financing the project and the rate at which interim cash inflows can realistically be reinvested. By doing this, MIRR provides a single annualized return that is often more stable and more realistic for projects with uneven or non‑standard cash flow patterns.

With MIRR, you treat all negative cash flows (outflows, such as investments or costs) as being financed at a specified finance rate, and all positive cash flows (inflows, such as revenues or savings) as being reinvested at a specified reinvestment rate. You then solve for the rate of return that equates the present value of outflows to the future value of inflows over the life of the project.

This calculator automates that process for a series of periodic cash flows and lets you choose separate finance and reinvestment rates so you can align the calculation with your cost of capital and expected reinvestment opportunities.

MIRR Formula and Components

In compact form, the MIRR formula can be written as:

Or more commonly expressed as:

MIRR = ( FVpos / (−PVneg) )1/n − 1

• FV_pos: future value of all positive cash flows, compounded to the end of the project at the reinvestment rate.
• PV_neg: present value of all negative cash flows, discounted back to time 0 at the finance rate.
• n: number of periods (for example, years) from the start to the end of the cash flow series.

The MIRR result is typically shown as an annual percentage. A higher MIRR indicates a more attractive investment, especially when compared against a hurdle rate or your weighted average cost of capital (WACC).

How to Calculate MIRR Step by Step

1. List the cash flows by period. Put the initial investment and any additional outlays as negative values, and all inflows as positive values, in chronological order.
2. Choose a finance rate. This usually reflects the cost of borrowing or your required return on capital (for example, your WACC).
3. Choose a reinvestment rate. This is the rate you expect to earn on interim cash inflows, which might be lower than the project return if you reinvest in safer assets.
4. Discount negative cash flows. Bring all outflows back to time 0 using the finance rate to get the total present value of negative cash flows, PV_neg.
5. Compound positive cash flows. Grow all inflows forward to the final period using the reinvestment rate to get the total future value of positive cash flows, FV_pos.
6. Apply the MIRR formula. Compute MIRR = ( FVpos / (−PVneg) )1/n − 1 to obtain the annualized modified internal rate of return.

Worked Example

Suppose you are evaluating a four‑year project with the following annual cash flows (in dollars):

• Year 0: −10,000 (initial investment)
• Year 1: 3,000
• Year 2: 4,000
• Year 3: 4,000
• Year 4: 5,000

Assume a finance rate of 8% and a reinvestment rate of 6%. There are 4 periods from Year 0 to Year 4.

1. Present value of negative cash flows

In this example, the only negative cash flow is the initial investment at Year 0, so:

PVneg = −10,000

2. Future value of positive cash flows

Compound each inflow to the end of Year 4 at 6%:

• Year 1 inflow: 3,000 × (1.06)3 ≈ 3,000 × 1.1910 ≈ 3,573
• Year 2 inflow: 4,000 × (1.06)2 ≈ 4,000 × 1.1236 ≈ 4,494
• Year 3 inflow: 4,000 × (1.06)1 = 4,000 × 1.06 = 4,240
• Year 4 inflow: 5,000 × (1.06)0 = 5,000

Then sum them:

FVpos ≈ 3,573 + 4,494 + 4,240 + 5,000 = 17,307

3. Apply the MIRR formula

Now compute:

MIRR = ( 17,307 / 10,000 )1/4 − 1

17,307 / 10,000 = 1.7307

The fourth root of 1.7307 is about 1.145, so:

MIRR ≈ 1.145 − 1 = 0.145, or 14.5% per year.

Interpreted in plain language, this project generates an effective annual return of about 14.5% when you assume an 8% finance rate and a 6% reinvestment rate.

How to Interpret MIRR Results

• Compare MIRR to your hurdle rate. If the MIRR exceeds your required return or cost of capital, the project is generally considered acceptable; if it falls below, it may not justify the risk or capital commitment.
• Use MIRR to rank projects of similar risk. When comparing mutually exclusive projects with similar risk and lifespan, a higher MIRR typically indicates a more attractive option.
• Consider scale and timing. MIRR does not convey project size directly. A smaller project might have a higher MIRR but add less total value than a larger project with a slightly lower MIRR.

MIRR vs IRR vs NPV

Analysts rarely rely on a single metric. MIRR, IRR, and net present value (NPV) each highlight different aspects of an investment. The table below summarizes key differences.

In practice, MIRR is particularly helpful for projects with non‑conventional cash flows or when realistic reinvestment opportunities are very different from the project’s own return. NPV remains the primary value‑creation metric, while MIRR and IRR help with communicating and comparing percentage returns.

Assumptions and Limitations of MIRR

• Regular timing of cash flows. MIRR assumes that cash flows occur at regular intervals (for example, annually). Irregular or intra‑period cash flows may require more detailed modeling.
• Constant finance and reinvestment rates. The calculation uses fixed rates over the entire life of the project. In reality, borrowing costs and reinvestment opportunities can change over time.
• Sensitivity to chosen rates. Different, reasonable choices for finance and reinvestment rates can produce different MIRR values. It is good practice to test a range of scenarios.
• No direct measure of project scale. MIRR is a percentage. It does not show absolute value creation, so it should be interpreted alongside NPV or total profit.
• Periodic, not continuous, compounding. Most MIRR implementations (including typical calculators) assume discrete compounding once per period rather than continuous compounding.
• Informational, not advisory. MIRR is one tool among many. For high‑stakes or complex investment decisions, consider consulting a qualified financial professional and combining MIRR with other analyses such as NPV, payback period, and scenario testing.

Used with these assumptions in mind, MIRR offers a clearer and often more realistic view of project performance than traditional IRR, especially when cash flows are irregular and financing and reinvestment conditions differ.