MIRR Calculator

Introduction: What Is Modified Internal Rate of Return (MIRR)?

Modified internal rate of return (MIRR) measures the periodic return of a cash-flow series while using one rate to finance negative flows and another rate to reinvest positive flows. Unlike traditional internal rate of return (IRR), MIRR makes both assumptions explicit, which can be useful when project inflows cannot realistically earn the project’s own return after they are received.

For MIRR, negative cash flows such as the initial investment and later costs are discounted to the first period at the finance rate. Positive cash flows such as revenue or savings are compounded to the last period at the reinvestment rate. The calculation then finds the periodic return connecting those two totals over the project life.

This MIRR calculator accepts a comma-separated sequence of periodic cash flows plus separate finance and reinvestment rates. Use periods consistently: if each entry represents a year, the result is an annual rate; if entries represent quarters, the result is a quarterly rate.

MIRR Formula and Cash-Flow Components

The MIRR calculation turns the financed value of negative project cash flows and the reinvested value of positive project cash flows into one periodic rate:

Written in the notation used by the MIRR calculator:

MIRR = ( FVpos / (−PVneg) )1/n − 1

• FV_pos: future value of all positive cash flows, compounded to the final period at the reinvestment rate.
• PV_neg: present value of all negative cash flows, discounted to period 0 at the finance rate.
• n: the number of intervals between the first and last cash-flow entries.

The displayed MIRR is a periodic percentage return. A larger result can indicate a stronger project return, but it should be compared with a hurdle rate stated for the same period length.

How to Calculate MIRR from Periodic Cash Flows

To reproduce the MIRR calculation, keep every cash flow in chronological order and apply the two rates to the appropriate sign of flow.

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, such as a WACC.
3. Choose a reinvestment rate. This is the rate expected on interim positive cash flows after receipt, which may be lower than the project return.
4. Discount negative cash flows. Bring each outflow back to period 0 using the finance rate to obtain the total present value of negative cash flows, PV_neg.
5. Compound positive cash flows. Grow each inflow forward to the final period using the reinvestment rate to obtain 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 periodic modified internal rate of return.

Worked Example: MIRR for a Four-Year Investment

This MIRR example evaluates a four-year project with the following annual cash flows, stated 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%. The sequence has four intervals from Year 0 through Year 4.

1. MIRR present value of negative cash flows

For this MIRR cash-flow series, the only negative flow is the initial investment at Year 0, so:

PVneg = −10,000

2. MIRR future value of positive cash flows

For the MIRR numerator, compound each positive flow 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

The reinvested positive flows total:

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

3. Apply the four-period MIRR formula

With the cash-flow totals above, calculate:

MIRR = ( 17,307 / 10,000 )1/4 − 1

17,307 / 10,000 = 1.7307

The fourth root of 1.7307 is about 1.147, so:

MIRR ≈ 1.147 − 1 = 0.147, or 14.7% per year.

In practical terms, these annual project cash flows produce an MIRR of about 14.7% when financing is valued at 8% and interim inflows are reinvested at 6%.

How to Interpret MIRR Results for a Project

Interpret a project’s MIRR against a return requirement that uses the same cash-flow frequency and reflects the project’s risk.

• Compare MIRR to your hurdle rate. If the MIRR exceeds your required return or cost of capital, the project may be 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 for Investment Decisions

For investment appraisal, MIRR, IRR, and net present value (NPV) answer different questions about the same cash-flow pattern. The table below distinguishes their financing, reinvestment, and value assumptions.

MIRR can be especially useful when a project has non-conventional cash flows or when the realistic reinvestment opportunity differs materially from the project’s implied IRR. NPV remains a direct measure of value creation, while MIRR and IRR express returns as percentages.

Assumptions and Limitations of MIRR

The MIRR result depends on the timing convention for the cash-flow entries and on the finance and reinvestment rates selected for the project.

• Regular timing of cash flows. MIRR assumes that cash flows occur at regular intervals, such as 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. Test rate assumptions that are relevant to the project.
• 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. This calculator compounds and discounts once for each cash-flow period rather than continuously.
• Informational, not advisory. MIRR is one input to an investment decision. For high-stakes or complex projects, combine it with NPV, payback analysis, and carefully documented cash-flow assumptions.

When the cash-flow timing and rate assumptions are credible, MIRR gives a transparent periodic-return view of a project by separating financing costs from the reinvestment of its inflows.

How to use this MIRR calculator

Enter the project’s periodic cash flows and the two rates that the MIRR calculation applies to negative and positive flows.

1. Enter Cash Flows (comma separated) in chronological order, using negative numbers for outflows and positive numbers for inflows.
2. Enter Finance Rate (%) as the periodic rate used to discount negative cash flows.
3. Enter Reinvestment Rate (%) as the periodic rate used to compound positive cash flows to the final period.
4. Calculate MIRR, then check that the cash-flow timing and both rate assumptions match the investment scenario you intend to evaluate.