# 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

**Determine the present value of negative cash flows:**

PV = C₀ – ∑ [Cᵢ / (1 + FR)ⁱ

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

**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%.