The modified internal rate of return, or MIRR, measures the annual percentage return of an investment if you reinvest its periodic cash flows at a specified reinvestment rate and hold the investment for the expected holding period. You specify the reinvestment rate, which differs from the rate of return you receive on the investment, in the calculation of MIRR. You can calculate the MIRR of an investment by calculating the future value of the investment's cash flows using the reinvestment rate, and then calculating the rate of return that grows the cost of the investment to the future value of the reinvested cash flows.

## Calculate Future Value of the Reinvested Cash Flows

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Determine the initial cost of an investment, the number of years you expect to hold the investment, the investment's annual cash flows and your expected reinvestment rate of those cash flows. For example, assume a 5-year investment costs $10,000 and pays you $2,800 in cash flow per year that you expect to reinvest at 10 percent rate of return.

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Input "0." Then press the "PV" key on your calculator to input the present value. Use 0 instead of the investment's cost because you must first calculate the future value of only the cash flow portion of the investment.

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Input the number of years of the holding period. Then press the "N" key. For example, input "5." Then press "N."

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Input the reinvestment rate. Then press the "I/YR" key. For example, input "0.1." Then press the "I/YR" key.

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Input the annual cash flow payment. Then press the "PMT" key. For example, input "2,800." Then press "PMT."

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Press the "FV" key to calculate the future value of the reinvested cash flows at the end of the holding period. In the example, this results in $17,094.28.

## Calculate MIRR

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Clear the values in the time value of money keys, which are the keys you used to calculate the future value.

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Input the initial cost of the investment as a negative number. Then press "PV." For example, input "-10,000." Then press "PV."

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Input the number of years of the holding period. Then press "N." For example, input "5." Then press "N."

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Input "0." Then press "PMT." Use 0 for the payment because you have already calculated the future value of the cash flows.

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Input the future value of the cash flows. Then press "FV." For example, input "17,094.28." Then press "FV."

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Press "I/YR" to solve for the percentage rate of return that grows the cost of the investment to the future value of the reinvested cash flows, which is the MIRR. In the example, this results in an MIRR of 11.3 percent, which is the annual rate of return of the investment if you reinvest your cash flows at a 10 percent reinvestment rate.