MIRR Calculator (Modified Internal Rate of Return)

This MIRR calculator estimates the modified internal rate of return for an investment, capital project, acquisition, property plan, or any forecast with uneven annual cash flows. MIRR is designed to improve on a common weakness of traditional IRR: it separates the rate used to finance cash outflows from the rate used to reinvest cash inflows. Informational, not investment advice.

The calculator follows the calculation method in the inputs. It starts with the initial investment as a present outflow. It then reads the cash-flow rows in order. Positive cash flows are compounded forward to the final period at the reinvestment rate. Negative cash flows after the initial investment are discounted back at the financing rate and added to the present value of outflows. MIRR is the annual rate that connects those two totals across the number of cash-flow rows.

How to use this calculator

Enter the initial investment as a positive dollar amount paid at the start. Enter the financing rate as the rate used to discount later negative cash flows. Enter the reinvestment rate as the rate positive cash flows are assumed to earn until the last period.

Then enter annual cash flows. Positive numbers are inflows, such as revenue, sale proceeds, distributions, or savings. Negative numbers are additional outflows, such as repairs, cleanup costs, working-capital needs, or follow-on investment. The current method uses the row order as year 1, year 2, year 3, and so on. Keep the rows in sequential annual order so the result matches your intended timing.

The output includes the future value of positive cash flows, present value of outflows, net cash before discounting, periods included, and the finance and reinvest rates. To compare capital-budgeting views, use this page with the net present value calculator, the internal rate of return calculator, the compound interest calculator, and the holding period return calculator.

Formula

For a project with n cash-flow rows, the future value of positive cash flows is:

$\text{FV of positive cash flows} = \sum \text{positive cash flow} \times \left(1 + \text{reinvestment rate}\right)^{\text{n} - \text{period}}$

It computes present value of outflows as the initial investment plus discounted later negative cash flows:

$\text{PV of outflows} = \text{initial investment} + \sum \frac{\left|\text{negative cash flow}\right|}{\left(1 + \text{finance rate}\right)^{\text{period}}}$

Then MIRR is:

$\text{MIRR} = \left(\frac{\text{FV of positive cash flows}}{\text{PV of outflows}}\right)^{\frac{1}{\text{n}}} - 1$

The calculator displays MIRR as a percentage. It marks the result positive when MIRR is at least the financing rate and warning otherwise. It rejects cases with no positive future value, no positive present value of outflows, rates at or below negative 100%, or no cash-flow rows.

Checking a mirr calculator (modified internal rate of return) scenario

The default example uses a $10,000 initial investment, 10% financing rate, 12% reinvestment rate, and five ordered cash flows: $6,000, -$4,000, $8,000, $3,000, and $7,000.

There are five periods. Positive cash flows are compounded to period five:

$\$6{,}000 \times 1.12^4 = \$9{,}441.12$

$\$8{,}000 \times 1.12^2 = \$10{,}035.20$

$\$3{,}000 \times 1.12^1 = \$3{,}360.00$

$\$7{,}000 \times 1.12^0 = \$7{,}000.00$

Adding those future values gives:

$\text{FV of positive cash flows} = \$29{,}836.32$

The year-two negative cash flow is discounted at the 10% financing rate and added to the initial investment:

$\text{PV of outflows} = \$10{,}000 + \frac{\$4{,}000}{1.10^2} = \$13{,}305.79$

Now calculate MIRR:

$\text{MIRR} = \left(\frac{\$29{,}836.32}{\$13{,}305.79}\right)^{\frac{1}{5}} - 1 = 0.175279$

The calculator reports 17.53% modified internal rate of return. It also reports $10,000.00 net cash before discounting because total inflows of $24,000 minus the $10,000 initial investment and $4,000 additional outflow leave $10,000 before discounting.

How MIRR is used

MIRR is most useful when a project has interim cash flows that will realistically be reinvested somewhere other than the project itself. Traditional IRR can become optimistic if it implicitly assumes that every interim inflow earns the IRR again. MIRR lets you choose a reinvestment rate that better reflects available opportunities, such as a treasury rate, portfolio return assumption, or company reinvestment hurdle.

It is also useful when cash flows change signs more than once. A project with environmental cleanup costs, major maintenance, or staged capital calls may have negative cash flows after positive years. MIRR handles those later negatives by discounting them at the financing rate, while standard IRR can create multiple rates or confusing signals.

For project selection, compare MIRR values only when the same financing and reinvestment assumptions are used. If one project uses a 12% reinvestment rate and another uses 5%, the difference may reflect assumptions more than project quality. MIRR should sit beside NPV, payback, strategic fit, capital constraints, and risk analysis.

Limitations and tips

• Keep rows in chronological annual order; the current calculation uses row order rather than the typed year value.
• Use realistic financing and reinvestment rates. Small changes can noticeably affect MIRR.
• MIRR is an annualized rate, not a dollar value. A smaller project can have a higher MIRR but create less wealth.
• Include all material outflows, including terminal cleanup, taxes, repairs, and working-capital needs when relevant.
• Do not compare MIRR with a hurdle rate unless both are stated on the same annual basis.
• Treat the result as only as reliable as the cash-flow forecast.

Sources

• Corporate Finance Institute, Modified Internal Rate of Return — MIRR definition and formula.
• Microsoft Support, MIRR function — spreadsheet reference for finance and reinvestment rates.
• Wikipedia, Modified internal rate of return — reference overview of MIRR.