Step 2: Calculating the Present Value of Outflows Next, you determine the present value of all negative cash flows (outflows). Step 1: Calculating the Future Value of Inflows The first step requires you to take all positive cash flows (inflows) and compound them forward to the end of the project's life.
Solving the Equation for MIRR on BA II Plus in Step 3
For example, if you have a $1,000 inflow in year 1 and a $2,000 inflow in year 2, you would calculate the future value of the $1,000 for two years and add it to the $2,000. The formula requires you to take the Nth root of the ratio of FV to PV, where N is the total number of periods.
These are typically the initial investment or subsequent costs. It is often efficient to calculate these sequentially, using the "FV" register to accumulate the total future value of all inflows.
Solving the Equation for MIRR on BA II Plus
On the BA II Plus, you input these cash flows as negative numbers and solve for the present value. This provides a more realistic rate of return compared to the standard IRR, which assumes cash flows are reinvested at the IRR itself.
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