MIRR Calculator

- May 12, 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
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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

Understanding the MIRR Calculator

The Modified Internal Rate of Return (MIRR) calculator helps you assess the profitability of an Investment. Unlike the traditional Internal Rate of Return (IRR), MIRR considers different rates for reinvesting positive cash flows and financing negative cash flows. This makes it a more accurate tool for evaluating investment performance.

Why Use the MIRR Calculator?

Using the MIRR calculator offers several advantages. It provides a clearer picture of how an investment might perform. Here are some key benefits:

  • Reflects realistic reinvestment rates for cash flows.
  • Avoids issues like multiple IRR values for the same investment.
  • Considers the cost of financing negative cash flows.
  • Helps compare different investment opportunities effectively.

Key Inputs for Accurate Results

To get the most out of the MIRR calculator, you'll need to input specific data. You'll start with your Finance and reinvestment rates. These rates significantly impact the MIRR calculation and should reflect your investment strategy. Additionally, you'll need to enter the cash flows for each year of the investment.

Investment Information Required

The calculator requires details about your investment, such as:

  • Finance Rate: The percentage at which negative cash flows are financed.
  • Reinvestment Rate: The percentage at which positive cash flows are reinvested.

Providing accurate numbers for these categories ensures more reliable outcomes.

How Cash Flows Influence MIRR

Cash flows play a crucial role in determining MIRR. When you input your initial investment and subsequent cash flows for each year, the calculator computes the terminal value of positive cash flows and the present value of negative flows. This interplay is vital for obtaining the final MIRR.

Visualising Your Cash Flow Data

The MIRR calculator also includes a visualisation feature. This allows you to see your cash flow data in a clear chart format. By visualising your cash flows, you can easily understand the investment’s performance over time and make informed decisions.

Calculation Steps for Clarity

One of the helpful features of the MIRR calculator is the step-by-step breakdown of the calculation. Users can view how the MIRR is computed, including the formula and the individual components. This transparency can help you understand how different inputs affect the overall result.

Final Insights about MIRR

The MIRR calculator is an essential tool for anyone looking to evaluate the potential success of their investments. By providing a more realistic measure of profitability, it serves as a useful guide in making informed Financial decisions. Whether you're assessing a single investment or comparing multiple options, this calculator can help simplify the process.