MIRR Calculator - Modified Internal Rate of Return

Enter cash flows, a finance rate, and a reinvestment rate to get the Modified IRR and an Accept or Reject decision.

📊 MIRR Calculator - Modified Internal Rate of Return
Initial Investment (Year 0 outflow)
$
Year 1 Cash Flow
$
Year 2 Cash Flow
$
Year 3 Cash Flow
$
Year 4 Cash Flow
$
Year 5 Cash Flow
$
Year 6 Cash Flow
$
Year 7 Cash Flow
$
Year 8 Cash Flow
$
Year 9 Cash Flow
$
Year 10 Cash Flow
$
Finance Rate (cost of capital / borrowing rate)10%
0%50%
Reinvestment Rate (return on reinvested cash flows)8%
0%50%
Hurdle Rate (minimum required return)12%
0%50%
MIRR
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Decision
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FV of Positive Cash Flows
—
PV of Negative Cash Flows
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Project Duration
—
IRR (for comparison)
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📊 What is MIRR (Modified Internal Rate of Return)?

MIRR (Modified Internal Rate of Return) is a capital budgeting metric that improves on the traditional Internal Rate of Return (IRR) by addressing two well-known flaws: the unrealistic reinvestment rate assumption and the possibility of multiple solutions. MIRR expresses the profitability of an investment as an annual percentage return, taking into account the actual cost of financing outflows and a realistic return assumption for reinvested inflows.

The key difference from IRR lies in how cash flows are treated. IRR implicitly assumes that all positive cash flows are reinvested at the IRR itself, which is often much higher than what the firm can realistically earn. For example, if an IRR is 35%, IRR assumes you can reinvest every dollar received at 35% per year, which is rarely possible. MIRR instead lets you specify a finance rate (the cost of capital applied to negative outflows) and a reinvestment rate (a conservative return applied to positive inflows). This produces a single, more realistic measure of return.

MIRR is particularly valuable when cash flows change sign more than once during a project, such as when additional capital injections are required in later years. In such cases, IRR can produce multiple solutions (all of which satisfy the NPV equation but give contradictory accept or reject signals). MIRR always has exactly one solution, making it unambiguous. Finance teams at major corporations use MIRR as a standard complement to NPV and IRR in capital expenditure (CapEx) analysis.

In practice, MIRR is most useful for project comparisons, real estate investments, leveraged buyouts, and any situation where cash flows have complex timing. A project with a MIRR above the hurdle rate (the minimum required return) is worth pursuing; one with a MIRR below the hurdle rate destroys value. This calculator computes MIRR alongside the traditional IRR so you can compare both metrics side by side.

📐 Formula

MIRR = (FV+ ÷ |PV−|)1/n − 1
FV+ = future value of all positive cash flows compounded at the reinvestment rate to the end of the project
|PV−| = absolute value of the present value of all negative cash flows discounted at the finance rate
n = total number of periods (years)
Finance rate = your cost of capital or borrowing rate, applied to outflows
Reinvestment rate = the expected return on reinvested positive cash flows
Example: CF0 = −100,000, CF1 = 30,000, CF2 = 60,000, CF3 = 50,000; finance rate 10%, reinvest rate 8%
FV+ = 30,000 × 1.08² + 60,000 × 1.08¹ + 50,000 × 1.08&sup0; = 34,992 + 64,800 + 50,000 = 149,792
|PV−| = 100,000 (no other negatives)
MIRR = (149,792 ÷ 100,000)1/3 − 1 = 1.49790.3333 − 1 = 0.1436 = 14.36%

📖 How to Use This Calculator

Steps to Calculate MIRR

1
Enter the initial investment - Type the upfront cost (as a positive number). The calculator automatically treats this as a negative cash flow at Year 0.
2
Add annual cash flows - Enter expected inflows (positive numbers) and any additional investments or costs (negative numbers) for each year. Use the Add Year button for projects longer than 3 years (up to 10 years).
3
Set the finance rate - Enter your WACC or cost of borrowing (typically 8 to 15%). This discounts any negative cash flows to the present.
4
Set the reinvestment rate - Enter a conservative rate for reinvested positive cash flows (risk-free rate, WACC, or expected market return). Lower than the finance rate is common.
5
Click Calculate MIRR - The MIRR, decision (Accept or Reject vs hurdle rate), FV of positive cash flows, PV of negative cash flows, and the traditional IRR for comparison are all shown instantly.

💡 Example Calculations

Example 1 - Manufacturing Equipment Investment

Initial cost: $100,000. Cash flows: $30,000, $40,000, $50,000. Finance rate: 10%, Reinvestment rate: 8%.

1
Compound positive cash flows to Year 3 at 8%: 30,000 times 1.08 squared = 34,992; 40,000 times 1.08 = 43,200; 50,000 times 1 = 50,000. FV(+) = 128,192.
2
PV of negative cash flows at 10%: only Year 0 is negative: PV(-) = 100,000.
3
MIRR = (128,192 / 100,000) raised to 1/3 minus 1 = 1.2819 raised to 0.3333 minus 1 = 8.63%.
MIRR = 8.63% (compare with IRR of approximately 13.5%)
Try this example →

Example 2 - Real Estate Development with Mid-Project Cost

Invest $200,000 now, $50,000 additional at Year 2, receive $120,000 at Year 3 and $180,000 at Year 4. Finance rate: 12%, Reinvestment rate: 8%.

1
FV of positive CFs at Year 4: 120,000 times 1.08 = 129,600; 180,000 times 1 = 180,000. FV(+) = 309,600.
2
PV of negative CFs at 12%: 200,000 at Year 0 = 200,000; 50,000 at Year 2 = 50,000 / 1.12 squared = 39,860. PV(-) = 239,860.
3
MIRR = (309,600 / 239,860) raised to 1/4 minus 1 = 1.2907 raised to 0.25 minus 1 = 6.59%.
MIRR = 6.59% (below 12% hurdle rate - Reject)
Try this example →

Example 3 - Strong Investment Comparison (MIRR vs IRR)

Initial: $50,000. Cash flows: $20,000, $25,000, $30,000. Finance rate: 10%, Reinvestment rate: 8%.

1
FV of positive CFs at Year 3: 20,000 times 1.08 squared = 23,328; 25,000 times 1.08 = 27,000; 30,000 = 30,000. FV(+) = 80,328.
2
PV(-) = 50,000 (only the initial investment).
3
MIRR = (80,328 / 50,000) raised to 1/3 minus 1 = 1.6066 raised to 0.3333 minus 1 = 17.12%. Traditional IRR is approximately 26.4%, significantly higher due to the reinvestment assumption difference.
MIRR = 17.12% vs IRR approximately 26.4% (both Accept at 12% hurdle)
Try this example →

❓ Frequently Asked Questions

What is MIRR and why is it better than IRR?+
MIRR (Modified Internal Rate of Return) improves on IRR by using a realistic reinvestment rate for positive cash flows instead of assuming they are reinvested at the IRR itself. MIRR also always produces a unique solution, whereas IRR can have multiple values when cash flows change sign more than once. MIRR is generally more conservative and more reflective of real-world returns.
How do I calculate MIRR step by step?+
Step 1: Compound all positive cash flows to the end of the project at the reinvestment rate to get FV(+). Step 2: Discount all negative cash flows to the start of the project at the finance rate to get PV(-). Step 3: MIRR = (FV(+) divided by absolute value of PV(-)) raised to the power of 1/n, minus 1. Where n is the total number of periods.
What is the finance rate in MIRR?+
The finance rate is the cost of capital used to discount negative cash flows back to the present. It represents the cost of funding those outflows, typically your WACC (Weighted Average Cost of Capital) or the interest rate on borrowed funds. A typical finance rate ranges from 8 to 15% for most businesses.
What reinvestment rate should I use for MIRR?+
The reinvestment rate should represent where positive cash flows will actually be deployed as they are received. Common choices are the risk-free rate (current Treasury yield, approximately 4 to 5%), the company's WACC, or expected market returns. A conservative reinvestment rate produces a more reliable and prudent MIRR.
Why is MIRR usually lower than IRR?+
IRR implicitly assumes positive cash flows are reinvested at the IRR itself, which inflates the return. MIRR uses a more conservative reinvestment rate (usually below the IRR), resulting in a lower compounded future value. Since FV is smaller in MIRR's calculation, MIRR is typically lower than IRR. This lower MIRR is more realistic.
Can I use MIRR for projects with unconventional cash flows?+
Yes, and this is one of MIRR's key advantages. Unconventional cash flows (multiple sign changes, late-project costs, decommissioning charges) can cause IRR to have multiple solutions or fail to converge. MIRR handles these cases cleanly by discounting all negatives and compounding all positives separately, always producing exactly one result.
What does it mean if MIRR equals the hurdle rate?+
If MIRR equals the hurdle rate exactly, the investment breaks even in economic terms: the present value of inflows equals the present value of outflows at the required rate of return. NPV would be approximately zero. The project neither creates nor destroys value, and the decision depends on qualitative factors like strategic fit or risk tolerance.
Is MIRR used in Excel?+
Yes. Microsoft Excel has a built-in MIRR function: =MIRR(values, finance_rate, reinvest_rate). The values argument is a range containing all cash flows from Year 0 onwards, finance_rate is the cost of capital, and reinvest_rate is the reinvestment rate. This matches the calculation performed by this online calculator.
How does MIRR relate to NPV?+
If MIRR exceeds the hurdle rate, NPV at the hurdle rate is positive (the project adds value). If MIRR is below the hurdle rate, NPV is negative (the project destroys value). If MIRR equals the hurdle rate, NPV is zero. Both metrics lead to the same accept or reject decision, but NPV shows the absolute dollar value created while MIRR shows the percentage return.
What are typical MIRR values for good investments?+
For established businesses: MIRR of 12 to 18% is considered good. For real estate: 8 to 15% is typical. For startups and venture investments: 20 to 35% MIRR is targeted to compensate for risk. The key is that MIRR exceeds your hurdle rate by a comfortable margin of at least 3 to 5 percentage points to provide a safety buffer against forecast errors.
Can MIRR be negative?+
Yes. A negative MIRR occurs when the FV of positive cash flows is less than the PV of negative cash flows: the project returns less than was invested in present value terms. This is a clear signal to reject the investment, as it destroys capital even before considering the opportunity cost of the hurdle rate.
How many cash flows can this MIRR calculator handle?+
This calculator supports up to 10 years of annual cash flows after the initial investment, for a total of 11 cash flow entries (Year 0 through Year 10). Use the Add Year and Remove Year buttons to adjust the number of periods. Each year's cash flow can be positive (inflow) or negative (additional outflow).
Tags: MIRR Calculator Modified Internal Rate of Return IRR Calculator Investment Appraisal Capital Budgeting Finance Rate Reinvestment Rate Calculator Formula Free Online

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What is MIRR (Modified Internal Rate of Return)?

MIRR is a capital budgeting metric that solves two key problems with IRR: the reinvestment rate assumption and multiple-root instability. MIRR uses a finance rate for negative cash flows (the cost of borrowing) and a separate reinvestment rate for positive cash flows (a realistic return rate). The result is a single, unique percentage return that is more reliable than IRR for investment decisions.

How is MIRR calculated?

MIRR = (FV of positive cash flows at reinvestment rate divided by PV of negative cash flows at finance rate) raised to the power of 1/n, minus 1. Where n is the number of periods. First, compound all positive cash flows to the end of the project at the reinvestment rate. Then, discount all negative cash flows to the start at the finance rate. The ratio of these two values raised to 1/n minus 1 is the MIRR.

What is the difference between MIRR and IRR?

IRR assumes all positive cash flows are reinvested at the IRR itself, which is often unrealistically high. MIRR uses a separate, more realistic reinvestment rate (typically the cost of capital or risk-free rate). MIRR is always unique; IRR can have multiple solutions when cash flows change sign more than once. MIRR is generally lower than IRR and is considered more conservative and accurate.

What finance rate should I use in the MIRR calculator?

Set the finance rate to your weighted average cost of capital (WACC) or the cost of borrowing for the project. This rate is used to discount any negative mid-period cash flows (additional investments or costs) back to the present. A typical range is 8 to 15% for most businesses.

What reinvestment rate should I use for MIRR?

The reinvestment rate should reflect where you will actually deploy positive cash flows as they are received. Conservative choices include the risk-free rate (Treasury yield, currently around 4 to 5%), the company's WACC, or a target savings return. A lower reinvestment rate gives a more conservative MIRR and is generally preferred for prudent analysis.

Is MIRR always lower than IRR?

In most cases, yes. When the reinvestment rate is below the IRR (which is the typical case), MIRR will be lower than IRR. If the reinvestment rate equals the IRR, then MIRR equals IRR. If the reinvestment rate is above the IRR (unusual), MIRR would be higher. This is why MIRR is considered more realistic for most investments.

When should I use MIRR instead of IRR?

Use MIRR when: (1) cash flows change sign more than once, making IRR unreliable or multiple-valued; (2) you want a more realistic measure that accounts for actual reinvestment returns; (3) you are comparing mutually exclusive projects where the scale of reinvested cash flows differs. For simple investments with a single sign change, IRR and MIRR will give consistent accept or reject decisions.

What is a good MIRR percentage?

A good MIRR depends on your cost of capital and risk profile. A MIRR above 15% is generally excellent for established businesses. For high-growth or startup investments, 20 to 30% MIRR is a common target. The key benchmark is the hurdle rate: any MIRR above the hurdle rate creates value. A margin of 3 to 5 percentage points above the hurdle rate provides a reasonable safety buffer.

How do I handle negative mid-period cash flows in the MIRR calculator?

Enter negative values for any year that requires additional investment or has net outflows. The MIRR formula discounts all negative cash flows (not just the initial investment) back to the present at the finance rate. This calculator supports up to 10 years of cash flows, each of which can be positive or negative.

Can MIRR be negative?

Yes. A negative MIRR means the investment destroys value even after accounting for the time value of money. If the FV of positive cash flows is less than the PV of negative cash flows, the ratio is less than 1 and MIRR is negative. This signals that the project should be rejected regardless of the hurdle rate.

What is the relationship between MIRR and NPV?

Both MIRR and NPV adjust for different reinvestment assumptions but express the result differently. If MIRR equals the hurdle rate, the NPV at the hurdle rate equals zero. If MIRR exceeds the hurdle rate, NPV is positive (value-creating). If MIRR is below the hurdle rate, NPV is negative (value-destroying). Use NPV for absolute value comparisons and MIRR for percentage-return comparisons.

What are the main advantages of MIRR over IRR?

MIRR has three main advantages over IRR: (1) it uses a more realistic reinvestment rate assumption rather than assuming reinvestment at the IRR; (2) it always produces a unique solution, eliminating the multiple-IRR problem that occurs when cash flows change sign more than once; (3) it provides a better basis for comparing projects of different sizes when the reinvestment of interim cash flows matters.

📌 Quick Tips

💡Set the finance rate equal to your cost of capital (WACC) and the reinvestment rate to a conservative rate such as the risk-free rate or expected market return.
💡MIRR is always unique. Unlike IRR, it never produces multiple solutions even when cash flows change sign more than once.
💡MIRR is typically lower than IRR because the reinvestment rate is usually below the IRR. A lower MIRR is more realistic and conservative.
💡For accept or reject decisions, compare MIRR to your hurdle rate. If MIRR exceeds the hurdle rate, the project adds value.
💡Use the Add Year button to model up to 10 years of cash flows. Mid-period negative cash flows (additional capital calls) are supported.