MIRR

The MIRR function in Google Sheets calculates the modified internal rate of return for a series of periodic cash flows, accounting separately for the interest rate paid on financing and the return earned on reinvested income. It gives a more realistic picture of investment performance than the standard IRR function. Dive into our comprehensive guide to master its application.

Parameters

• cashflow_amounts: A range containing the series of cash flows, including at least one negative (outflow) and one positive (inflow) value.
• financing_rate: The interest rate paid on money used in the cash flows (negative values).
• reinvestment_return_rate: The interest rate earned on reinvested income (positive values).

Step-by-Step Tutorial

1. Calculating a modified internal rate of return:
   • Example: If A1:A5 contains -10000, 3000, 4200, 6800, 1500, then =MIRR(A1:A5, 0.08, 0.1) will return the modified internal rate of return based on an 8% financing rate and 10% reinvestment rate.

Use Cases and Scenarios

1. Investment Analysis: Compare the profitability of projects with different financing and reinvestment assumptions.
2. Capital Budgeting: Evaluate long-term projects where reinvestment rates differ from borrowing costs.
3. Portfolio Management: Assess realistic returns on investments that involve both inflows and outflows over time.

Related Functions

• IRR: Calculates the internal rate of return for a series of cash flows.
• NPV: Calculates the net present value of an investment based on a discount rate and a series of cash flows.
• XIRR: Calculates the internal rate of return for cash flows that occur at irregular intervals.

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