@wikipedia
One of the Investment Project:
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| \mbox{MIRR} = \left( \frac{ \sum_t FV[CF^+_t]}{-\sum_t PV[CF^-_t]}} \right)^{1/T} - 1 = (1+r) \cdot \left( \frac{ \sum_t PV_r[CF^+_t]}{-\sum_t PV_{r_f}[CF^-_t]}} \right)^{1/T} - 1 |
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| PV_{r_f}[CF^-] = \sum_{t=0}^T \frac{CF^-_t}{(1+r_f)^t} |
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| FV_r[CF^+] = \sum_{t=0}^T CF^+_t \cdot (1+r)^{T-t} = (1+r)^T \cdot \sum_{t=0}^T \frac{CF^+_t}{(1+r)^t} = (1+r)^T \cdot PV_r[_t}{(1+r)^t} = (1+r)^T \cdot PV_r[CF^+] |
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where
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| positive cash flows | | negative cash flows |
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body | --uriencoded--CF%5e+_0 = 0 |
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body | --uriencoded--CF%5e-_0 = I_0 |
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| initial investment |
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body | --uriencoded--\displaystyle FV[CF%5e+] |
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| future value of the positive cash flows | LaTeX Math Inline |
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body | --uriencoded--\displaystyle PV[CF%5e-] |
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| present value of the negative cash flows |
The usual practise is to give preferences to the Investment Projects with higher MIRR and make a direct comparison of MIRR against the Weighted Average Cost of Capital (WACC).
MIRR is similar to IRR in nature but free from some common IRR issues.
The corporate investment policy usually dictates that:
See also
Economics / Investment / Financial Investment / Financial Investment Metrics
[ Financial Investment Project ]
[ Weighted Average Cost of Capital (WACC) ] [ Cash Discount ] [ Net Present Value (NPV) ]
[ Internal Rate of Return (IRR) ]