The Modified Internal Rate of Return (MIRR) is an Excel function that calculates the rate of return on an investment that takes into account both the initial investment and the periodic cash flows. The MIRR function is used to compare two investment options, or to determine whether an investment is worth making. To use the MIRR function in Excel, you must enter the following information: the initial investment, the periodic cash flow, the number of periods, and the reinvestment rate. The Excel MIRR function will then calculate the rate of return on the investment.
The syntax of MIRR in Excel is as follows: MIRR(rate, nper, pmt, pv, fv, type)
rate is the interest rate per period nper is the number of periods pmt is the payment per period pv is the present value fv is the future value type is 0 for a regular annuity or 1 for an annuity due
MIRR, or Modified Internal Rate of Return, is a financial calculation used to determine the profitability of a project or investment. It takes into account the cost of financing the investment, as well as the potential return on the investment. To calculate MIRR in Excel, you'll need to know the following:
-The initial investment
-The cost of financing the investment
-The potential return on the investment
-The number of periods the investment will be held
Once you have these figures, you can calculate MIRR in Excel using the following formula:
MIRR = (CF1 / (1 + r)1) ^ (n - 1) - (CF2 / (1 + r)2)
CF1 = The initial investment CF2 = The cost of financing the investment r = The potential return on the investment n = The number of periods the investment will be held
MIRR should not be used in Excel under the following circumstances: when there is negative net cash flow in the investment, when there are unequal cash flows, or when there are different interest rates for different cash flows. In these situations, a different financial calculation is needed.
The MIRR (modified internal rate of return) formula in Excel is: =MIRR(values, reinvestment_rate, periods)
The MIRR formula is similar to the IRR (internal rate of return) formula, which is: =IRR(values, reinvestment_rate)
The main difference between the MIRR and IRR formulas is that the MIRR formula takes into account the reinvestment of cash flows. The reinvestment_rate is the rate at which the cash flows from the investment are reinvested. The periods parameter is the number of periods over which the cash flows are reinvested.