MIRR Calculator – Modified Internal Rate of Return (finance & reinvestment rates)

Understanding the MIRR calculator — concept and principle

The modified internal rate of return (MIRR) measures a project's yearly return while avoiding two known problems with the ordinary IRR. Analysts use it in capital budgeting when cash flows are uneven or change sign more than once.

Outflows are discounted at the 9% finance rate, inflows grown at the 12% reinvestment rate, giving one growth rate: 8.32%.

How it is calculated

Compound every positive cash flow forward to the last period at the reinvestment rate: FV of inflows.
Discount every negative cash flow back to period 0 at the finance rate: PV of outflows.
MIRR = (FV of inflows ÷ PV of outflows)^(1/n) − 1, where n is the number of periods.
For comparison, IRR is found by bisection as the rate that makes NPV zero, and NPV is shown at the finance rate.

The principle

IRR implicitly assumes that every cash flow received during the project is reinvested at the IRR itself, which is often unrealistic for a very profitable project. When cash flows switch between positive and negative more than once, IRR can also have several solutions or none. MIRR fixes both: you state realistic rates for borrowing (finance) and reinvesting, collapse the project into one outflow today and one inflow at the end, and take the single growth rate that links them.

Worked example

Default inputs (MathWorks example): cash flows −100,000; 20,000; −10,000; 30,000; 38,000; 50,000; finance rate 9%; reinvestment rate 12%.

n = 5 periods.
PV of outflows = 100,000 + 10,000 ÷ 1.09² ≈ 108,417 USD.
FV of inflows = 20,000 × 1.12⁴ + 30,000 × 1.12² + 38,000 × 1.12 + 50,000 ≈ 161,662 USD.
MIRR = (161,662 ÷ 108,417)^(1/5) − 1 ≈ 8.32%.
For comparison, IRR ≈ 6.74% and NPV at 9% ≈ −7,486 USD.

Each point is the calculator re-run with only “Reinvestment rate for inflows (% per period)” changed; the gold point is the default example. Change the inputs above and this chart follows your numbers.

Reinvestment rate for inflows (% per period)	MIRR
3	5.76%
6	6.6%
9	7.45%
12	8.32%
15	9.2%
18	10.1%
24	11.94%

How to read the result

Accept a project when MIRR exceeds your cost of capital or required return. Here MIRR (8.32%) is below the 9% finance rate, which agrees with the negative NPV at 9%. It is still higher than the IRR (6.74%), because the 12% reinvestment assumption boosts the inflows. That gap shows how much the result depends on the reinvestment rate, so choose it carefully. For mutually exclusive projects of different size, NPV remains the main decision rule.

Common mistakes

Using an annual rate with monthly cash flows.
Forgetting the sign: outflows must be negative.
Setting an optimistic reinvestment rate that the firm cannot actually earn.
Leaving out a period with a zero cash flow, which shifts all later timing.

Keep in mind: MIRR depends on the finance and reinvestment rates you choose. It is a decision aid, not investment advice.

Frequently asked questions

What is the difference between IRR and MIRR?

IRR assumes reinvestment at the IRR; MIRR uses the reinvestment and finance rates you specify and always gives one answer.

Which rate should I use for reinvestment?

Often the firm's cost of capital, because that is a realistic return on reinvested cash.

Is MIRR the same as Excel's MIRR function?

Yes, the method matches Excel's MIRR(values, finance_rate, reinvest_rate).

Sources: MathWorks, mirr function documentation (example data) · Brigham & Ehrhardt, Financial Management: Theory and Practice (capital budgeting, MIRR)

Checked 9 Nov 2026. MathWorks, Financial Toolbox documentation, “mirr — Modified internal rate of return”: definition (rate that equates the present value of negative cash flows with the future value of positive cash flows) and example cash flows −100,000, 20,000, −10,000, 30,000, 38,000, 50,000 with 9% / 12% → 8.32%.

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