Modified IRR

Modified IRR assumes positive cash flows are reinvested at a specified reinvestment rate rather than at the IRR itself, providing more realistic return measurement for multi-period investments.


MIRR vs Traditional IRRDifference
IRR assumptionReinvest cash flows at IRR rate (often unrealistic)
MIRR assumptionReinvest at specified market rate (more realistic)
MIRR calculationFuture value of positive flows / present value of negative flows
ResultMIRR typically lower and more conservative than IRR
Example ComparisonReturn
Traditional IRR14.5%
MIRR (reinvest at 6%)11.2%
MIRR (reinvest at 8%)11.2%
More realistic expectation11.8%

Related Terms

Internal Rate of Return (IRR)Net Present Value (NPV)Discounted Cash Flow (DCF)Modified IRRTotal Return

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