Modified Internal Rate of Return Calculator
Calculate modified internal rate of return calculator MIRR. Fast, precise calculation for corporate, startup, and small business planning across USA/UK/Canada.
Calculate Modified Internal Rate of Return Calculator
Enter your financial inputs below to compute Modified IRR (MIRR) (%).
Calculation Results
Calculated using commercial accounting formula: MIRR = (Terminal Value / Initial Outlay)^(1/n) - 1
Quick Summary
The Modified Internal Rate of Return (MIRR) Calculator resolves standard IRR distortions by factoring in a realistic reinvestment rate for intermediate cash inflows.
- MIRR (%): Modified rate of return using realistic reinvestment rates.
- Terminal Value ($): Total accumulated value of cash inflows at end of project horizon.
- Reinvestment Rate (%): Rate earned when reinvesting annual cash flows.
How to Use the Modified Internal Rate of Return Calculator
- Enter total Initial Capital Outlay.
- Enter expected Annual Net Cash Inflow.
- Enter your Reinvestment Rate (%).
- Click Calculate to view Modified IRR (MIRR %).
- Click Reset to clear inputs.
Modified Internal Rate of Return Calculator Formula & Method
This tool utilizes standard accounting algorithms to compute business returns:
MIRR (%) = [ (Terminal Value / Initial Outlay) ^ (1 / n) ] - 1
Where:
- Terminal Value: Compounded value of cash flows at year n.
- Reinvestment Rate: Rate earned on cash reserves (cost of capital).
- n: Project duration in years (5 years).
Worked Example
Example: $100,000 Outlay, $32,000 Annual Inflows at 6% Reinvestment Rate
- Initial Outlay: $100,000.00
- Annual Inflow: $32,000.00 / year (5 Years)
- Reinvestment Rate: 6.0%
Applying the formula yields:
Terminal Value at Year 5: $178,467.43
Modified IRR (MIRR): 12.28% (vs 18.03% standard IRR)
What This Calculator Includes vs. Does Not Include
What This Calculator Includes
- Realistic Reinvestment Modeling: Eliminates unrealistically high IRR reinvestment assumptions.
- Terminal Value Compounder: Calculates total future terminal value of cash flows.
What This Calculator Does Not Include
- Multiple Financing Rates: Variable interest rates across different debt tranches.
Tips & Best Practices
- Use MIRR When Comparing Projects with High IRRs: Standard IRR overstates returns for high-yielding projects, whereas MIRR gives realistic figures.
- Set Reinvestment Rate equal to WACC: Use your company's Weighted Average Cost of Capital as the reinvestment rate.
Common Mistakes to Avoid
- Assuming Reinvestment Rate Equals Project IRR: Assuming 50% cash flows can be reinvested at 50% is unrealistic.
Frequently Asked Questions (FAQ)
What is Modified Internal Rate of Return (MIRR)?
MIRR is a financial metric that modifies standard IRR by assuming cash inflows are reinvested at the company's cost of capital rather than the project's IRR.
How do you calculate MIRR?
Compound future cash inflows to terminal value at the reinvestment rate, then calculate the CAGR between initial outlay and terminal value: MIRR = (Terminal Value / Outlay)^(1/n) - 1.
Why is MIRR better than standard IRR?
Standard IRR unrealistically assumes cash flows are reinvested at the high IRR rate. MIRR uses a conservative, realistic reinvestment rate, preventing over-optimistic project rankings.
Is MIRR always lower than IRR for profitable projects?
Yes, for any project with an IRR higher than the reinvestment rate, MIRR will be lower than standard IRR.
What reinvestment rate should be used in MIRR?
Use your company's Weighted Average Cost of Capital (WACC) or cost of capital.
Can MIRR solve the multiple IRR problem?
Yes, MIRR produces a single unique rate of return even when cash flows change signs multiple times.
How do investors use MIRR in capital rationing?
Investors rank competing projects by MIRR to select projects that maximize terminal value per dollar invested.
What is the relation between MIRR and NPV?
MIRR and NPV yield consistent project acceptance recommendations, whereas standard IRR can conflict with NPV.
Is this MIRR calculator free?
Yes, TibCal's Modified Internal Rate of Return Calculator is 100% free.