Modified IRR Calculator

Compute a modified internal rate of return using explicit finance and reinvestment rates.

About Modified IRR Calculator

Ordinary IRR implicitly assumes interim cash flows are reinvested at the IRR itself, which is usually unrealistic and overstates attractive projects. MIRR compounds inflows forward at an explicit reinvestment rate instead. MIRR also avoids the multiple-solution problem that afflicts IRR when cash flows change sign more than once.

Formula

Modified IRR

MIRR = (terminal value of inflows ÷ present value of outflows)^(1/n) − 1

reinvestment rate: Realistic rate at which interim cash flows can be redeployed
finance rate: Cost of capital funding the outflows

Worked example

With the default values below, Modified IRR Calculator returns Modified Internal Rate of Return of 11.970%. Change any input above and every figure here is recalculated in your browser.

Inputs used

Initial investmentminimum 0.01: 100,000
Annual cash inflowminimum 0: 30,000
Project lifeaccepts 1–50 years: 5 years
Rate at which inflows are reinvestedaccepts 0–100 %: 8 %
Cost of financing the outflowaccepts 0–100 %: 10 %

Results

Modified Internal Rate of Return: 11.970%
Terminal Value of the Inflows: $175,998.03
Present Value of the Outflows: $100,000.00
Simple Return for Comparison: 10.000%
Verdict: Accept — the modified return exceeds the cost of finance

Step by step

1Values used
2Modified IRR
3Modified Internal Rate of Return= 11.970
4Terminal Value of the Inflows= 175,998.03
5Present Value of the Outflows= 100,000.00
6Simple Return for Comparison= 10.000
7Verdict= Accept — the modified return exceeds the cost of finance

Assumptions and limits

The result is derived only from the 5 inputs listed above. Anything not among them is not part of the calculation.
In particular, this calculator does not take inflation or tax into account.
Figures are rounded for display to 3 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.
This is an estimate for general information and not professional financial, tax or legal advice. See the full disclaimer for the limits that apply to this kind of calculator.

How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.

Frequently Asked Questions

How is Modified IRR calculated?

MIRR = (terminal value of inflows ÷ present value of outflows)^(1/n) − 1 Ordinary IRR implicitly assumes interim cash flows are reinvested at the IRR itself, which is usually unrealistic and overstates attractive projects. MIRR compounds inflows forward at an explicit reinvestment rate instead.

Why does Modified IRR matter?

MIRR also avoids the multiple-solution problem that afflicts IRR when cash flows change sign more than once.

What values do I need to enter?

This calculator takes 5 inputs: Initial investment, Annual cash inflow, Project life, Rate at which inflows are reinvested, Cost of financing the outflow. The pre-filled defaults are a realistic starting point — replace them with figures from your own environment for a result you can act on.