Meaning and example
MIRR is the modified internal rate of return, which specifies a financing rate for negative cash flows and a reinvestment rate for positive cash flows separately. In a regular educational setup, negative amounts are brought to the beginning, positive amounts are compounded to the end, and one rate of transition between the two resulting totals is then found over the number of intervals. If the discounted investments equal 100, the final compounded amount is 121 and two intervals have passed, MIRR is 10% per interval. The selected external rates remain assumptions: the measure does not make reinvestment guaranteed and does not replace NPV or a scale check.
How to avoid a mistake
For n equal intervals, the formula is: MIRR = (FV of positive cash flows / |PV of negative cash flows|)^(1/n) − 1. Both cash-flow signs and a positive number of intervals are required. Zeros within the series preserve the calendar: removing a year with no receipts changes the calculation period even if the total amount of money remains unchanged.
For more on comparing investment projects, see the [educational analysis](/guides/capital-allocation-decisions/).
Sources and review boundaries
Support: **gl-ms-mirr**. The example is editorial. The sources verify the concept, but do not confirm the reliability of anyone’s financial statements or the suitability of a decision for a particular investor.