MIRR Calculator (Modified IRR)

IRR is more commonly used, but MIRR is more realistic. Here is when and why to use each one.

The reinvestment rate problem with IRR

IRR implicitly assumes that all positive cash flows can be reinvested at the IRR itself. If a project has a 35% IRR, it assumes you can reinvest each year's returns at 35% — which is usually impossible.

MIRR fixes this by separating the finance rate (cost of borrowing) from the reinvestment rate (your actual reinvestment opportunities).

When to use MIRR over IRR

1. Multiple sign changes in cash flows — projects that require capital injections mid-way can produce multiple mathematically valid IRRs. MIRR always returns a single value.
2. Comparing projects of different scale — MIRR is better when you need to compare a $500K project to a $5M project with different cash flow patterns.
3. Sophisticated lenders or board members require it — PE firms and sophisticated investors often prefer MIRR for realistic return modelling.

When IRR is fine

For simple, conventional cash flow patterns (one initial outflow followed by inflows), IRR and MIRR give similar results and IRR is more widely understood.

Use the MIRR calculator to compute MIRR with your choice of finance and reinvestment rates.

Excel's built-in MIRR function makes the calculation straightforward — but there are a few gotchas worth knowing before you use it in a model.

Excel MIRR syntax

=MIRR(values, finance_rate, reinvest_rate)

values: a range of cells containing the cash flows (Year 0 through Year N). The first value must be negative (initial investment).

finance_rate: the interest rate you pay on negative cash flows (cost of borrowing). Use your WACC or cost of debt.

reinvest_rate: the interest rate you earn on reinvested positive cash flows. Use a conservative rate — Treasury yield, savings rate, or opportunity cost.

Example

Cash flows: Year 0 = −$100,000, Year 1–4 = $30,000 each. Finance rate = 10%, Reinvest rate = 8%.

=MIRR({-100000,30000,30000,30000,30000}, 10%, 8%)
= 7.83%

With standard IRR: =IRR({-100000,30000,30000,30000,30000}) = 7.71%

MIRR is slightly higher here because the reinvest rate (8%) is above the IRR (7.71%). MIRR moves toward the reinvest rate: when the reinvest rate is below the IRR, MIRR comes out lower than IRR.

Common mistakes

1. Not including Year 0: the values array must include the initial outflow at position 0. If you start from Year 1, the function gives wrong results.
2. Using the same rate for both arguments: this reduces MIRR to a simple IRR approximation and defeats the purpose.
3. Mixing periods: MIRR assumes annual periods unless you adjust. For monthly cash flows, divide annual rates by 12.

Use the MIRR calculator for a web-based version without needing Excel.