MIRR — Smart Financial Analysis
Calculate Modified Internal Rate of Return (MIRR) with realistic reinvestment and finance rates. MIRR fixes IRR's flaws.
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IRR assumes all positive cash flows are reinvested at the IRR itself (often unrealistic). MIRR = (Terminal Value of Positive CFs / PV of Negative CFs)^(1/n) - 1. MIRR uses realistic reinvestment assumptions (often WACC or market rate). MIRR is used to rank and select projects.
Ready to run the numbers?
Why: MIRR (Modified Internal Rate of Return) fixes IRR's two biggest flaws: it uses a realistic reinvestment rate instead of assuming reinvestment at the project's own rate...
How: Enter Initial Investment ($), Cash Flows ($), Finance Rate (%) to get instant results. Try the preset examples to see how different scenarios affect the outcome, then adjust to match your situation.
Run the calculator when you are ready.
📋 Quick Examples — Click to Load
📊 MIRR vs IRR Comparison
IRR often overestimates; MIRR is more realistic.
📈 Terminal Value Growth
Positive cash flows compounded at reinvestment rate.
📊 Cash Flow Timeline
Positive (green) and negative (red) cash flows.
🍩 Reinvestment Assumptions
Finance rate, reinvestment rate, and resulting MIRR.
For educational purposes only — not financial advice. Consult a qualified advisor before making decisions.
💡 Money Facts
MIRR analysis is used by millions of people worldwide to make better financial decisions.
— Industry Data
Financial literacy can increase household wealth by up to 25% over a lifetime.
— NBER Research
The average American makes 35,000 financial decisions per year—many can be optimized with calculators.
— Cornell University
Globally, only 33% of adults are financially literate, making tools like this essential.
— S&P Global
Modified Internal Rate of Return (MIRR) fixes IRR's two biggest flaws: (1) assumes reinvestment at the project's own rate, and (2) can produce multiple solutions for non-conventional cash flows. MIRR formula: MIRR = (Terminal Value of Positive CFs / PV of Negative CFs)^(1/n) - 1. MIRR uses a realistic reinvestment rate (usually WACC or market rate) instead of IRR's unrealistic assumption. Example: a project with 22% IRR might have only 16% MIRR at 10% reinvestment rate. MIRR always produces a single, unique answer. Corporate finance best practice: use MIRR alongside NPV for capital budgeting decisions.
Sources: CFA Institute, Brealey Myers Corporate Finance, Investopedia, Journal of Finance.
Key Takeaways
- • MIRR uses explicit finance and reinvestment rates; IRR assumes reinvestment at IRR.
- • MIRR always gives one answer; IRR can give multiple for non-conventional cash flows.
- • A project with 22% IRR might have 16% MIRR at 10% reinvestment — IRR overestimates.
- • Use WACC or market rate as reinvestment rate for realistic capital budgeting.
Did You Know?
How Does MIRR Work?
Step 1: Terminal Value
Compound all positive cash flows forward to the end of the project using the reinvestment rate. Each positive CF is grown to the final period: FV = CF × (1 + r)^(n - t).
Step 2: Present Value of Outflows
Discount all negative cash flows back to time zero using the finance rate. PV = CF / (1 + f)^t for each negative flow.
Step 3: Solve for MIRR
MIRR = (Terminal Value / PV of Negative CFs)^(1/n) - 1
This is the single rate that equates the compounded inflows to the discounted outflows. n = number of periods.
Expert Tips
MIRR vs IRR Comparison
| Feature | IRR | MIRR |
|---|---|---|
| Reinvestment | At IRR (unrealistic) | Explicit rate (realistic) |
| Multiple solutions | Yes, for non-conventional CFs | No, always one answer |
| Finance rate | Not explicit | Explicit |
| Best for | Simple comparisons | Capital budgeting |
Frequently Asked Questions
What is MIRR?
MIRR (Modified Internal Rate of Return) fixes IRR's two biggest flaws: it uses a realistic reinvestment rate instead of assuming reinvestment at the project's own rate, and it always produces a single unique answer even for non-conventional cash flows. MIRR = (Terminal Value of Positive CFs / PV of Negative CFs)^(1/n) - 1.
MIRR vs IRR: what's the difference?
IRR assumes all positive cash flows are reinvested at the IRR itself (often unrealistic). MIRR lets you specify separate finance and reinvestment rates. Example: a project with 22% IRR might have only 16% MIRR at 10% reinvestment — IRR overestimates returns.
What is the MIRR formula?
MIRR = (Terminal Value of Positive CFs / PV of Negative CFs)^(1/n) - 1. Terminal Value = sum of positive CFs compounded forward at reinvestment rate. PV of Negative CFs = sum of negative CFs discounted at finance rate. n = number of periods.
Why is MIRR better than IRR?
MIRR uses realistic reinvestment assumptions (often WACC or market rate). IRR can produce multiple solutions for non-conventional cash flows; MIRR always gives one answer. Corporate finance best practice: use MIRR alongside NPV for capital budgeting decisions.
What reinvestment rate should I use for MIRR?
Use your company's WACC (Weighted Average Cost of Capital), the expected return on similar investments, or the market rate at which you can realistically reinvest intermediate cash flows. Typical range: 8–12% for many businesses.
How is MIRR used in capital budgeting?
MIRR is used to rank and select projects. Accept projects where MIRR exceeds the required rate of return. Compare MIRR across projects of different sizes and durations. Use alongside NPV — if NPV > 0 and MIRR > hurdle rate, the project adds value.
Key Statistics
Official Data Sources
⚠️ Disclaimer: This calculator is for educational purposes only. MIRR results depend on assumptions about finance and reinvestment rates. Not financial advice. Consult a professional for investment decisions.
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