MIRR (Modified IRR) Calculator

MIRR: Modified Internal Rate of Return

MIRR (Modified IRR) patches the two big weaknesses of plain IRR. It applies an explicit reinvestment rate to the positive flows (typically the firm's WACC) and a separate, explicit finance rate to the negative ones. The formula is MIRR = (FV⁺ / |PV⁻|)^(1/n) − 1. Here FV⁺ is the future value of the inflows compounded at the reinvestment rate, and PV⁻ is the present value of the outflows discounted at the finance rate. What you get back is more conservative and realistic than IRR, and it stays unique even if the cash flows flip sign several times. Take the series −1,000, +300, +400, +400, +300: with reinvestment at 8% and financing at 10%, its MIRR lands somewhere between those two rates, and below the standard IRR.

Applications and context

You'll see it in industrial capex decisions, when comparing alternatives whose cash flows aren't conventional (several sign changes), and throughout corporate finance, M&A and project finance. It shows up in CFA Level II and in textbooks like Brealey and Damodaran, mostly because it sidesteps the reinvestment-rate fallacy.

FAQ

Why is MIRR always unique? The formula rolls every inflow into one future value and every outflow into one present value, so there's a single root left to solve for.

Which rates should I use? For the reinvestment rate, use the WACC or whatever rate the firm can realistically reinvest cash at. For the finance rate, use the cost of capital that funds the outflows.

MIRR vs IRR — which is better? On the merits MIRR wins, particularly for projects with odd flows or big payouts partway through. That said, IRR is still the number people quote.