Modified Internal Rate of Return (MIRR) Calculator Online

MIRR Calculator – Modified Internal Rate of Return

Modified Internal Rate of Return Calculator

The MIRR is Modified internal Rate Of Return . MIRR equal to Future value divied to present value. The IRR formula – you will notice that, while the future value of positive cash flows is still taken into consideration, the MIRR metric is not that similar to the NPV equation.

The Formula us,

MIRR = [(FV(positive cash flows, reinvestment rate) / PV(negative cash flows, finance rate)] ^ (1/n) – 1

let us consider,

  • n is the number of time periods (typically, years) between now and the end of the project.
  • FV stands for the future value of all positive cash flow.

The formula for FV is:

FV = ∑ [Cᵢ * (1 + RR)ⁿ⁻ⁱ]FV = ∑ [Cᵢ * (1 + RR)ⁿ⁻ⁱ]

  • PV stands for the present value of all negative cash flows.

The formula for PV is:

PV = C₀ – ∑ [Cᵢ / (1 + FR)ⁱ]

  • RR is the reinvestment rate – an interest rate expressed as a percentage.
  • FR is the finance rate.

calculate MIRR

Example

We will assume the financing rate of 10% and the reinvestment rate of 12%. The number of years n = 5.

  • Determine the future value of positive cash flows:

FV = ∑ [Cᵢ * (1 + RR)ⁿ⁻ⁱ]FV = ∑ [Cᵢ * (1 + RR)ⁿ⁻ⁱ]

FV = 6000 * (1 + 0.12)⁴ + 8000 * (1 + 0.12)² + 3000 * (1 + 0.12) + 7000 = $29,836

  1. Determine the present value of negative cash flows:

PV = C₀ – ∑ [Cᵢ / (1 + FR)ⁱ

PV = 10000 – (-4000) / (1 + 0.10)² = $13,306

  1. The MIRR formula:

MIRR = [FV / PV] ^ (1/n) – 1

MIRR = [29,836 / 13,306] ^ (1/5) – 1

MIRR = 17.53%

The MIRR of this case is equal to 17.53%. By comparison, the IRR metric is equal to 24.38%.

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