MIRR Calculator - Modified Internal Rate of Return
Enter your initial investment, up to ten years of projected cash flows, your financing rate, and the rate at which you expect to reinvest positive cash flows. The calculator returns the MIRR instantly, shows a step-by-step breakdown of the present value of outflows and future value of inflows, and charts how your cumulative position evolves over the project life.
What is MIRR and how does it differ from IRR?
The Modified Internal Rate of Return (MIRR) is a measure of the profitability of an investment that addresses two well-known shortcomings of the traditional Internal Rate of Return (IRR). First, IRR implicitly assumes that any positive cash flows generated during the project life are reinvested at the IRR itself, which is often unrealistically high. MIRR instead lets you specify a separate, more realistic reinvestment rate for those inflows. Second, IRR can produce multiple solutions when cash flows alternate between positive and negative more than once, making interpretation ambiguous. MIRR always produces a single, unambiguous result. The formula computes the future value of all positive cash flows (compounded at the reinvestment rate to the final period) and the present value of all negative cash flows (discounted at the financing rate), then finds the single rate that equates those two quantities over the project's life.
The MIRR formula
MIRR = (FV of positive cash flows at reinvestment rate / PV of negative cash flows at financing rate)^(1/n) - 1, where n is the number of periods minus one. The future value of positive cash flows is: FV = sum of CF_i+ multiplied by (1 + reinvestment rate)^(n minus i), for each period i with a positive cash flow. The present value of negative cash flows is: PV = absolute value of the sum of CF_i- divided by (1 + financing rate)^i, for each period i with a negative cash flow. The financing rate is the cost of capital or borrowing rate, representing how much it costs to fund the outflows. The reinvestment rate represents the expected return on the positive cash flows when they are deployed elsewhere in the business.
Choosing the right financing and reinvestment rates
The financing rate is typically the weighted average cost of capital (WACC) or the borrowing rate of the firm. It reflects the cost of funding the project's outflows. The reinvestment rate is usually set to the firm's opportunity cost of capital, a conservative long-run average return, or the WACC itself. Using the same value for both rates reduces MIRR to a figure comparable to the NPV-positive threshold rate, but separating them produces a more nuanced result. A conservative approach is to set the reinvestment rate equal to the risk-free rate or a modest equity return, since assuming high reinvestment rates inflates MIRR. Many analysts set the reinvestment rate at 8-12% for most corporate projects.
When to use MIRR over IRR
Use MIRR whenever: (1) the project has unconventional cash flows with multiple sign changes, which would give IRR multiple solutions; (2) you want to account for realistic reinvestment assumptions rather than the IRR's built-in optimistic reinvestment; (3) you are comparing projects of different sizes or durations, where IRR alone can mislead. MIRR remains a rate-of-return metric, so it shares the general limitation of all rate metrics: it can rank projects incorrectly when their scales differ significantly. For capital allocation decisions, pair MIRR with Net Present Value (NPV) for a complete picture.
MIRR interpretation benchmarks
| MIRR range | Interpretation | Typical action |
|---|---|---|
| Below 0% | Project destroys value | Reject or redesign |
| 0% to 5% | Marginally positive return | Likely reject unless strategic |
| 5% to 10% | Below most hurdle rates | Borderline, review assumptions |
| 10% to 15% | Meets typical corporate hurdle rates | Likely accept |
| 15% to 25% | Strong positive return | Accept |
| Above 25% | Exceptional return (verify assumptions) | Accept with scrutiny |
General guidance for interpreting MIRR relative to common hurdle rates. Actual thresholds vary by industry and risk profile.
Frequently asked questions
What is the difference between MIRR and IRR?
Traditional IRR assumes that all positive cash flows are reinvested at the IRR itself, which is often unrealistically high. MIRR separates the financing rate (used to discount negative flows) from the reinvestment rate (used to compound positive flows), producing a more realistic and always unique answer. IRR can also give multiple solutions for non-conventional cash flow patterns, while MIRR gives exactly one.
What reinvestment rate should I use?
A common choice is your company's WACC or a conservative long-run return on equity, typically 8-12% for established businesses. Using an overly optimistic reinvestment rate will inflate the MIRR and make the project look more attractive than it really is. Some analysts simply use the firm's borrowing rate for both the financing and reinvestment rates as a conservative baseline.
What financing rate should I use?
The financing rate is usually the company's cost of debt, WACC, or the interest rate on the loan being used to fund the project. It represents the cost of carrying the negative cash flows until revenue starts flowing in.
Can MIRR be negative?
Yes. A negative MIRR means the project is expected to destroy value, even under the chosen rate assumptions. This happens when the compounded future value of inflows is less than the compounded present value of outflows by the final period.
Is a higher MIRR always better?
Generally yes, but MIRR should be compared against a hurdle rate (often WACC), not just maximized in isolation. A project with a lower MIRR but a large scale (large NPV) may create more total value than a smaller project with a higher MIRR. Always use MIRR alongside NPV when comparing mutually exclusive projects.
How many cash flow periods can I enter?
This calculator supports up to 10 periods (Year 0 through Year 9). Periods with a value of zero at the end of the series are automatically trimmed so the MIRR reflects only the active project life.