Skip to content
Finance Calc Kit
Business

Modified IRR Calculator

Calculate the Modified Internal Rate of Return (MIRR) for project cash flows using financing and reinvestment rates.

Project cash flows

$
%
%

Annual cash inflows

$
$
$
$

Modified internal rate of return (MIRR)

17.07%

Finance 8.0% | Reinvest 10.0%

MIRR component analysis

Terminal value of positive inflows (FV)$18,783.00
Present value of negative outflows (PV)$10,000.00
Total nominal inflows+$16,500.00
Modified rate of return17.07%
Report tool

What is Modified Internal Rate of Return (MIRR)?

Modified Internal Rate of Return (MIRR) improves on standard IRR by separating the rate at which negative cash flows are financed from the rate at which positive cash flows are reinvested. Standard IRR implicitly assumes interim inflows reinvest at the IRR itself, which can produce multiple solutions or unrealistic reinvestment assumptions. MIRR uses explicit finance and reinvestment rates, making capital budgeting comparisons more defensible.

Corporate analysts use MIRR alongside NPV when ranking mutually exclusive projects. Compare the classic IRR for the same cash flow stream with our IRR calculator, or model enterprise valuations with the discounted cash flow calculator.

MIRR formula

First discount all negative cash flows to present value using the finance rate. Then compound all positive cash flows forward to the terminal period using the reinvestment rate. MIRR is the equivalent annual return linking those two aggregates:

MIRR=(FVpositivePVnegative)1n−1\text{MIRR} = \left(\frac{FV_{\text{positive}}}{PV_{\text{negative}}}\right)^{\frac{1}{n}} - 1
PVnegative=∑t∣CFt∣(1+rfinance)tfor CFt<0PV_{\text{negative}} = \sum_{t} \frac{|\text{CF}_t|}{(1 + r_{\text{finance}})^t} \quad \text{for } \text{CF}_t < 0
FVpositive=∑tCFt×(1+rreinvest)n−tfor CFt>0FV_{\text{positive}} = \sum_{t} \text{CF}_t \times (1 + r_{\text{reinvest}})^{n - t} \quad \text{for } \text{CF}_t > 0

Worked example

A project requires a $10,000 outlay at Year 0 with annual inflows of $3,000, $4,000, $4,500, and $5,000. Using an 8% finance rate and 10% reinvestment rate, the present value of the outlay is $10,000. Compounding inflows forward produces a terminal value of $18,783. Over four periods, MIRR equals 17.07%, lower than the standard IRR on the same flows because reinvestment is capped at 10% rather than the higher IRR.

Frequently asked questions

When should I use MIRR instead of IRR?
Use MIRR when interim cash flows are reinvested near your cost of capital rather than at the project IRR, or when IRR produces multiple rates because cash flows change sign more than once.
What finance rate should I enter?
Use your weighted average cost of capital (WACC) or the marginal borrowing rate that funds the initial investment. This reflects the cost of capital tied up in negative cash flows.
What reinvestment rate should I enter?
Use the rate you realistically earn on interim surpluses, often the firm short-term investment yield or a conservative hurdle rate below the project IRR.
Can MIRR be negative?
Yes. When terminal value of inflows falls below the financed present value of outflows, the ratio inside the root is below one and MIRR turns negative, signaling value destruction.

Resources and references

The formulas and methods in this calculator were checked against these independent sources.