1. What is MIRR with WACC?

Definition: The Modified Internal Rate of Return (MIRR) is a financial metric that calculates an investment's return while accounting for the cost of capital (WACC) and reinvestment rate.

Purpose: It provides a more accurate reflection of an investment's profitability than standard IRR by assuming reinvestment at the firm's cost of capital.

2. How Does the MIRR Calculator Work?

The calculator uses the formula:

Where:

• \( MIRR \) — Modified internal rate of return (decimal)
• \( FV_p \) — Future value using WACC (USD)
• \( PV_n \) — Present value using WACC (USD)
• \( n \) — Number of periods (dimensionless)

Explanation: The ratio of future value to present value is raised to the power of 1/n periods, then subtracted by 1 to get the periodic return rate.

3. Importance of MIRR Calculation

Details: MIRR provides a more realistic measure of an investment's attractiveness by:

• Accounting for the cost of capital (WACC)
• Eliminating multiple IRR problems
• Providing a single, clear rate of return

4. Using the Calculator

Tips:

• Enter positive cash flows as Future Value (FV_p)
• Enter negative cash flows as Present Value (PV_n)
• Specify the total number of periods (n)
• All values must be > 0

5. Frequently Asked Questions (FAQ)

Q1: How is MIRR different from IRR?
A: MIRR assumes reinvestment at the firm's cost of capital (WACC), while IRR assumes reinvestment at the IRR rate itself.

Q2: What's a good MIRR value?
A: Generally, MIRR should exceed the company's WACC to be considered a good investment.

Q3: When should I use MIRR instead of IRR?
A: Use MIRR when cash flows are unconventional or when you want to account for different financing and reinvestment rates.

Q4: How do I calculate FV_p and PV_n?
A: FV_p is the sum of positive cash flows compounded at WACC. PV_n is the sum of negative cash flows discounted at WACC.

Q5: Can MIRR be negative?
A: Yes, a negative MIRR indicates the investment would lose money when accounting for the cost of capital.