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 is a valuable tool for anyone looking to evaluate the potential profitability of an Investment. This calculator helps you determine an investment's MIRR by considering different rates for reinvesting positive cash flows and financing negative cash flows. By using MIRR, investors can get a more accurate picture of their investment's performance compared to traditional methods.

Why MIRR is More Reliable

The MIRR method addresses some weaknesses of the traditional Internal Rate of Return (IRR). Unlike IRR, which assumes all cash flows are reinvested at the same rate, MIRR allows users to define realistic reinvestment and Finance rates. This provides a clearer view of how an investment is expected to perform over time.

Key Features of the MIRR Calculator

  • Input fields for finance and reinvestment rates
  • Ability to add multiple cash flows for different years
  • Options to show calculation steps and compare MIRR with traditional IRR
  • Customisable decimal place settings for results

How to Use the Calculator

Using the MIRR Calculator is straightforward. You start by entering the finance rate and the reinvestment rate. Next, you can add cash flows for each year of the investment. The calculator will then process this information and provide you with the MIRR, allowing you to see how your investment stands.

Benefits of Using the MIRR Method

  • Realistic Reinvestment Rates: Set rates that match your Financial situation for a better assessment.
  • No Multiple IRR Issues: Always provides one clear answer, avoiding confusion.
  • Financing Costs Taken Into Account: Reflects actual borrowing costs, leading to more informed decisions.
  • Better Investment Comparisons: A reliable method to compare different investment options accurately.

When to Consider Using the MIRR Calculator

This calculator is especially useful in various situations. If you're assessing long-term projects or comparing multiple opportunities, MIRR can help clarify which option may yield better results. It's also beneficial when cash flow patterns fluctuate, involving both positive and negative amounts.

Visualising Cash Flows

The MIRR Calculator includes a feature that visualises cash flows over time. This graphical representation helps you better understand the financial journey of your investment, making it easier to identify trends and patterns. Seeing your cash flows in a chart can provide insights that numbers alone might miss.

Final Thoughts on the MIRR Calculator

The MIRR Calculator is a powerful resource for investors wanting to make informed decisions. By providing a detailed view of an investment's potential, focusing on realistic rates and cash flow patterns, this tool is an indispensable part of financial analysis. Whether you are new to investing or an experienced investor, understanding MIRR can greatly enhance your investment evaluation skills.