How to Calculate Modified I R R
What is Modified I R R?
Modified IRR (MIRR) fixes IRR's reinvestment rate assumption by using explicit finance/reinvestment rates; often more realistic.
Step-by-Step Guide
- 1Input cash flows, finance rate (for negative CF), reinvestment rate (for positive CF)
- 2Calculate MIRR
- 3Compare to regular IRR
Worked Examples
Input
Standard IRR 25%, but reinvestment at 10%
Result
MIRR ≈ 18% (more realistic)
Avoids unrealistic assumptions
Common Mistakes to Avoid
- ✕Using same rate for finance and reinvestment
- ✕Not reflecting realistic opportunity costs
Frequently Asked Questions
Should I always use MIRR?
Yes if assumptions reasonable; more realistic than IRR for most projects.
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