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Modified Internal Rate of Return (MIRR) Calculator

Calculate the Modified Internal Rate of Return (MIRR) to evaluate project returns with realistic reinvestment rates.

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Calculation Parameters

Specify your inputs below.

Calculated Result

Terminal Value of Inflows $91,072.00
Modified IRR (MIRR) 6.69%
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Expert Tip

MIRR is more accurate than traditional IRR because it assumes positive cash flows are reinvested at a realistic rate, rather than the IRR itself.

How this Calculator Works

This calculator computes the Modified Internal Rate of Return (MIRR) for a series of periodic cash flows. Unlike the standard IRR, MIRR assumes that positive cash flows are reinvested at the firm's cost of capital, and initial outlays are financed at the financing interest rate. Financial managers use it for more accurate capital budgeting comparison.

Formula & Methodology

MIRR = [ (Terminal Value of Positive Cash Flows / Present Value of Negative Cash Flows)^(1 / n) ] - 1 - Terminal Value of Positive Cash Flows is the future value of positive cash flows compounded at the reinvestment rate. - Present Value of Negative Cash Flows is the present value of negative cash flows discounted at the finance rate. - n is the number of periods.

Step-by-Step Calculation Example

Here is a step-by-step example showing how the calculations are performed:

An initial investment of $10,000 yields cash flows of $5,000 in Year 1 and $6,000 in Year 2. Reinvestment rate is 8%, financing rate is 6%. 1. Calculate Terminal Value of positive cash flows at Year 2: $5,000 * (1 + 0.08)^1 + $6,000 = $11,400. 2. Calculate Present Value of negative cash flows (initial outlay): $10,000. 3. Compute MIRR: ($11,400 / $10,000)^(1/2) - 1 = 6.77%. Result: The Modified Internal Rate of Return (MIRR) is 6.77%.

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Detailed Insights & Expert Guide

ℹ️ About this Calculation

This investment analytics calculator evaluates portfolio yield, compounding growth, risk-adjusted returns, present/future asset valuations, and capital growth metrics based on CFA and modern portfolio theory (MPT) principles.

Variable Glossary

Input

Investment Parameters

Initial principal, periodic contribution, interest rate, discount factor, holding period, or asset price inputs.

Parameter

Performance Metrics

Compound Annual Growth Rate (CAGR %), Net Present Value (NPV), Internal Rate of Return (IRR), or Sharpe ratio.

How to Calculate Step-by-Step

1

Step 1

Enter your initial investment capital, asset purchase prices, or cash flow streams.

2

Step 2

Set compounding frequency, discount rate, or benchmark risk-free rate factors.

3

Step 3

Review calculated total return value, annualized growth %, or risk-adjusted alpha/beta statistics.

FAQ

How does compounding frequency impact investment returns?
More frequent compounding (e.g. monthly or daily vs. annually) generates higher effective annual yields (APY) because interest is calculated on accumulated interest earlier in the period.
What is the difference between Sharpe Ratio and Sortino Ratio?
The Sharpe ratio divides excess return by total standard deviation (both upside and downside volatility), whereas the Sortino ratio divides excess return by downside deviation only.
Should investment calculators replace professional wealth management?
No. Investment calculators model financial mathematics under assumed growth rates. Actual market performance fluctuates, so consult a licensed financial planner (CFP) or RIA for personalized advice.