MIRR Calculator · Modified Internal Rate of Return

MIRR Calculator

Modified Internal Rate of Return · Separate finance & reinvestment rates · Fixes IRR flaws.

Currency
Rates
% / yr
% / yr
Finance rate = what you pay to borrow (used to discount negative cash flows). Reinvestment rate = what you earn on positive cash flows (typically WACC or a conservative hurdle).
Cash Flows
Year Description Cash Flow Classification
Enter Year 0 as a negative number (initial investment). Subsequent years can be positive (returns) or negative (costs). MIRR handles multiple sign changes better than IRR.
MIRR Result
📊 Ready
MIRR: —
—
📈 MIRR
—
📊 IRR (for comparison)
—
💵 NPV
—
🎯 MIRR − Finance Rate
—
PV of Negatives
—
FV of Positives
—
Positive Flows
—
Negative Flows
—
MIRR vs IRR vs Finance Rate (The Realistic Picture)
NPV of all cash flows —
FV of positive flows @ reinvest rate —
PV of negative flows @ finance rate —
IRR is reliable? —
MIRR / Finance Rate ratio —
💡 Interpretation
Enter your cash flows to see the MIRR analysis.
Cash Flow Analysis
YearCash FlowPV @ Finance RateFV @ Reinvest Rate

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Faiq Ur Rahman

Founder & CEO, Toolraxy

Faiq Ur Rahman is a web designer, digital product developer, and founder of Toolraxy, a growing platform of web-based calculators and utility tools. He specializes in building structured, user-friendly tools focused on health, finance, productivity, and everyday problem-solving.

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IRR has a well-known flaw. It assumes every dollar the project returns gets reinvested at the project’s own IRR, which is often absurd. A project with a 45% IRR does not exist in a world where you can actually earn 45% on interim cash. MIRR fixes that by letting you specify two separate rates: one for financing the outflows, one for reinvesting the inflows. The result is a single, unambiguous return figure that survives multiple sign changes in the cash flow stream. This calculator is used by corporate finance teams evaluating capital projects, real estate investors modelling development timelines, and analysts comparing proposals of different sizes and durations.

 

How to Use the MIRR Calculator

  1. Pick the currency your cash flows are denominated in.

  2. Set the finance rate, the cost of borrowing, often your WACC or a loan rate.

  3. Set the reinvestment rate, what you can realistically earn on positive cash flows. This is often a savings rate or a conservative hurdle.

  4. Enter each year’s cash flow. Use a negative figure for the initial investment and any subsequent outflows.

  5. Add or remove rows as needed. The tool requires at least two cash flows, one positive and one negative.

  6. Load a quick-example scenario: simple project, multiple sign changes, equipment, real estate, SaaS, or a loss-making case.

  7. Read the MIRR figure at the top, then compare it against IRR, NPV, and the finance rate in the cards below.

  8. Scroll to the comparison chart and cash flow table to see how each flow was treated.

 

How the MIRR Calculator Formula Works

MIRR reworks the cash flow stream so that there’s only one growth rate to solve for.

Formula: MIRR = (FV of positive cash flows ÷ |PV of negative cash flows|)^(1/n) − 1

Where the FV of positive cash flows is computed by compounding each positive flow forward to the final year at the reinvestment rate, and the PV of negative cash flows is computed by discounting each negative flow back to year 0 at the finance rate. n is the number of periods.

Two supporting calculations run in parallel. NPV is computed at the finance rate — the standard discounted cash flow sum. IRR is computed via bisection over a range of discount rates, and the tool reports the first sign change it detects in the NPV curve. Because IRR can have multiple solutions when cash flows change sign more than once, the calculator also counts the number of sign changes and flags whether IRR is reliable in this case.

The reinvestment rate and finance rate can be the same — many analysts use WACC for both, which produces a conservative “MIRR at cost of capital.” But the whole point of the modified calculation is that they can differ. A company with a high return on interim cash might use a higher reinvestment rate; a project with expensive debt financing might use a higher finance rate.

Edge cases: if all cash flows share the same sign (all positive or all negative), MIRR is undefined and the tool returns N/A. If the PV of negatives is zero, the calculation collapses. The tool requires at least one positive and one negative cash flow.

 

Worked Example

A mid-size manufacturer is evaluating a $250,000 equipment purchase. The equipment will generate annual savings for five years, but a mid-cycle overhaul in year 3 will cost $60,000. The company’s cost of capital is 9%, and it expects to earn 6% on cash held between now and when it’s spent.

Cash flows:

  • Year 0: −$250,000

  • Year 1: +$85,000

  • Year 2: +$90,000

  • Year 3: −$60,000

  • Year 4: +$95,000

  • Year 5: +$100,000

 

Step 1 – FV of positive flows at 6% reinvestment rate (compounded to year 5):

  • Year 1: 85,000 × 1.06^4 = 107,304

  • Year 2: 90,000 × 1.06^3 = 107,191

  • Year 4: 95,000 × 1.06^1 = 100,700

  • Year 5: 100,000 × 1.06^0 = 100,000

  • Total FV = $415,195

 

Step 2 – PV of negative flows at 9% finance rate:

  • Year 0: −250,000 ÷ 1.09^0 = −250,000

  • Year 3: −60,000 ÷ 1.09^3 = −46,333

  • Total PV = −$296,333

 

Step 3 – MIRR:
MIRR = (415,195 ÷ 296,333)^(1/5) − 1 = 1.4012^0.2 − 1 ≈ 6.98%

The project’s MIRR is about 6.98%, which sits below the 9% finance rate. On this basis, the project destroys value, it doesn’t clear the cost of capital. Notice the cash flow pattern: two sign changes (negative → positive → negative → positive) mean the plain IRR would be unreliable. It might report a high IRR that looks attractive, but the MIRR cuts through the distortion. The takeaway: a project that looks acceptable on IRR can fail the MIRR test when realistic financing and reinvestment assumptions are applied.

Frequently Asked Questions

What does MIRR stand for and how does it differ from IRR?

MIRR stands for Modified Internal Rate of Return. It differs from IRR by not assuming that interim cash flows get reinvested at the project’s own IRR. Instead, MIRR lets you specify a finance rate for outflows and a reinvestment rate for inflows, producing a single return figure that survives multiple sign changes.

 

Why is IRR considered unreliable for some projects?

When a project’s cash flow stream changes sign more than once, for example, a negative year 0, positive years 1–2, negative year 3 from a renovation, and positive years 4–5, the IRR equation can have multiple mathematical solutions or none at all. That makes IRR ambiguous or unusable for those projects. MIRR always produces a single answer.

 

What finance rate should I use?

Use the rate at which you’d actually finance the negative cash flows. For a company project, that’s usually the weighted average cost of capital or the specific rate on debt raised for the project. For an individual investor, it might be a mortgage rate or the rate on a line of credit.

 

What reinvestment rate should I use?

Use the rate you can realistically earn on positive cash flows between the time you receive them and the end of the project. A conservative choice is a short-term savings rate. A more aggressive choice is the return on your next-best investment. Many analysts use WACC for both rates, which gives a deliberately conservative MIRR.

 

Can MIRR be negative?

Yes. If the PV of negative cash flows exceeds the FV of positive cash flows, the ratio is less than one, and the nth root of a number below one is below one, producing a negative MIRR. A negative MIRR means the project loses money on a present-value basis and should generally be rejected.

 

What if my cash flows are all positive or all negative?

MIRR is undefined in that case. A stream of all-positive cash flows has no initial investment to discount, and a stream of all-negative cash flows has nothing to compound forward. The calculator requires at least one flow on each side of zero.

 

How is MIRR different from NPV?

MIRR is a percentage return. NPV is a dollar amount. MIRR tells you what annualized rate the project earns after accounting for realistic financing and reinvestment assumptions. NPV tells you how many dollars of value the project creates at a given discount rate. Both belong in a capital budgeting decision.

 

Does MIRR account for project size?

No. MIRR is a rate, not a dollar figure, so it doesn’t distinguish between a $1,000 project earning 15% and a $10 million project earning 15%. NPV captures size differences. If you’re comparing projects of very different scales, use both metrics.

 

Can I use MIRR to compare projects of different lengths?

Yes, but with care. MIRR produces an annualized rate, so it’s comparable across time horizons in a way that a cumulative return isn’t. However, projects of different lengths carry different risk profiles, a 20-year project has more uncertainty than a 3-year project, even at the same MIRR.

 

Why is MIRR usually lower than IRR?

Because IRR implicitly assumes reinvestment at the project’s own return, which is typically much higher than realistic reinvestment rates. MIRR uses an explicit reinvestment rate — often a savings rate or WACC and that lower rate pulls the effective return down. The gap between IRR and MIRR is the size of the reinvestment distortion.

 

What does a negative MIRR mean for a project?

A negative MIRR means the project loses money on a discounted basis. The PV of the outflows exceeds the future value of the inflows, so the return is negative in real terms. Such a project should generally be rejected unless there’s a strategic or non-financial reason to proceed.

 

How many cash flow periods do I need?

At least two, one positive and one negative. In practice, a project with fewer than three periods isn’t worth the analysis. Most real projects run for three to thirty years, and the calculator handles any number of rows you add.

Financial Disclaimer

This MIRR calculator is an educational tool and does not constitute investment, tax, or financial advice. The calculation assumes a single finance rate applied to all negative cash flows and a single reinvestment rate applied to all positive cash flows, which simplifies real-world financing arrangements where rates vary over time. MIRR should be used alongside NPV and qualitative factors, not as a sole decision criterion. Cash flow projections are inherently uncertain and small changes in timing can materially affect the result. Consult a qualified financial professional before making capital allocation decisions based on these figures.

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