MIRR Calculator (Modified Internal Rate of Return)
Enter values separated by commas. The first value is usually the initial investment (negative).
The interest rate paid on the money used to finance the investment.
The interest rate expected on reinvested cash flows.
Modified Internal Rate of Return
0.00%
function calculateMIRR() {
// Get inputs
var flowsInput = document.getElementById('cashFlows').value;
var financeRateInput = document.getElementById('financeRate').value;
var reinvestRateInput = document.getElementById('reinvestRate').value;
var resultBox = document.getElementById('resultBox');
var resultEl = document.getElementById('mirrResult');
var errorEl = document.getElementById('errorMessage');
var explanationEl = document.getElementById('explanationText');
// Reset display
errorEl.style.display = 'none';
resultBox.style.display = 'none';
// Parse Rates
if (financeRateInput === " || reinvestRateInput === ") {
errorEl.textContent = "Please enter both Finance Rate and Reinvestment Rate.";
errorEl.style.display = 'block';
return;
}
var fr = parseFloat(financeRateInput) / 100;
var rr = parseFloat(reinvestRateInput) / 100;
if (isNaN(fr) || isNaN(rr)) {
errorEl.textContent = "Rates must be valid numbers.";
errorEl.style.display = 'block';
return;
}
// Parse Cash Flows
var flowsStr = flowsInput.split(',');
var flows = [];
for (var i = 0; i < flowsStr.length; i++) {
var val = parseFloat(flowsStr[i].trim());
if (!isNaN(val)) {
flows.push(val);
}
}
if (flows.length < 2) {
errorEl.textContent = "Please enter at least two cash flow values (Initial Investment + Year 1).";
errorEl.style.display = 'block';
return;
}
// Calculation Logic
// n is the number of periods (Total flows – 1, since index 0 is time 0)
var n = flows.length – 1;
var pvNeg = 0; // Present value of negative flows
var fvPos = 0; // Future value of positive flows
for (var t = 0; t < flows.length; t++) {
var flow = flows[t];
if (flow 0) {
// Compound positive flows to Future Value at Reinvestment Rate
// Compounded for (n – t) periods
fvPos += flow * Math.pow(1 + rr, n – t);
}
}
// MIRR Formula: (FV_pos / -PV_neg)^(1/n) – 1
// Handle division by zero or positive PV (if no negative flows exist)
if (pvNeg >= 0) {
errorEl.textContent = "Calculation Error: No negative cash flows (investment costs) found to finance.";
errorEl.style.display = 'block';
return;
}
// pvNeg is negative, so -pvNeg is positive
var base = fvPos / (-pvNeg);
if (base < 0) {
errorEl.textContent = "Calculation Error: Resulting base is negative.";
errorEl.style.display = 'block';
return;
}
var mirr = Math.pow(base, 1 / n) – 1;
var mirrPercent = (mirr * 100).toFixed(2);
// Display Result
resultEl.textContent = mirrPercent + "%";
explanationEl.textContent = "Based on " + (n) + " periods, a finance rate of " + financeRateInput + "%, and a reinvestment rate of " + reinvestRateInput + "%.";
resultBox.style.display = 'block';
}
What is the Modified Internal Rate of Return (MIRR)?
The Modified Internal Rate of Return (MIRR) is a sophisticated financial metric used in capital budgeting to assess the attractiveness of an investment or project. While the traditional Internal Rate of Return (IRR) is widely used, it suffers from a significant flaw: it assumes that positive cash flows generated by the project are reinvested at the project's own IRR.
The MIRR improves upon this by assuming that positive cash flows are reinvested at the firm's cost of capital or a specific external reinvestment rate. This usually provides a more accurate reflection of a project's profitability and cost-efficiency.
Why use MIRR over IRR?
Reinvestment Assumption: IRR assumes reinvestment at the IRR rate (often unrealistically high), while MIRR uses a practical market rate.
Single Solution: IRR can produce multiple results for projects with alternating positive and negative cash flows. MIRR always yields a single, unique solution.
Accuracy: MIRR is generally considered a better indicator of a project's true return.
How the MIRR Calculation Works
The calculation involves three distinct steps designed to standardize the movement of cash over time:
Calculate the Future Value (FV) of Positive Cash Flows: All positive cash inflows are compounded to the end of the project's life using the Reinvestment Rate.
Calculate the Present Value (PV) of Negative Cash Flows: All negative cash outflows (investments) are discounted back to the start (time 0) using the Finance Rate (cost of capital).
Solve for MIRR: Determine the discount rate that equates the PV of outflows to the FV of inflows over the project duration.
Calculation Example
Scenario: You invest $10,000 initially. You anticipate returns of $4,000 in Year 1, $4,000 in Year 2, and $5,000 in Year 3.
Just like standard IRR, if the MIRR exceeds the expected return or the cost of capital (Finance Rate), the project is typically considered acceptable. If comparing mutually exclusive projects, the one with the higher MIRR is generally preferred, provided the scale of investment is similar.