How to Calculate MIRR by Hand
Introduction & Importance
MIRR, or Modified Internal Rate of Return, is a crucial metric in capital budgeting that helps evaluate the profitability of an investment project. Unlike IRR, MIRR considers both the reinvestment rate and the cost of capital, making it a more accurate measure of a project’s profitability.
How to Use This Calculator
- Enter the investment amount, annual revenue, initial investment, number of years, and tax rate.
- Click “Calculate MIRR”.
- View the results and chart below.
Formula & Methodology
The MIRR formula is: MIRR = [(1 + IRR) * (1 – r) – 1] / (1 – (1 – r) * (1 – IRR)^n), where IRR is the internal rate of return, r is the cost of capital, and n is the number of periods.
Real-World Examples
Data & Statistics
| Tax Rate (%) | IRR (%) | MIRR (%) |
|---|---|---|
| 20 | 15.5 | 14.8 |
| 30 | 14.2 | 13.5 |
| 40 | 13.1 | 12.4 |
Expert Tips
- Always consider the reinvestment rate and cost of capital when evaluating a project’s profitability.
- MIRR is more accurate than IRR for projects with unequal cash flows.
- Use this calculator to compare MIRR for different projects or scenarios.
Interactive FAQ
What is the difference between IRR and MIRR?
IRR assumes that all intermediate cash inflows are reinvested at the IRR rate, while MIRR considers the reinvestment rate and the cost of capital.
Learn more about MIRR on Investopedia
Understand IRR from the U.S. Securities and Exchange Commission