The process involves determining the future value of positive cash flows and the present value of negative cash flows, then using those results to solve for the MIRR. Understanding the MIRR Calculation Methodology The MIRR is a refined version of the traditional Internal Rate of Return (IRR) that assumes positive cash flows are reinvested at the firm's cost of capital, and that the initial outlays are financed at the firm's financing cost.
BA II Plus MIRR Step By Step Process
To calculate the Modified Internal Rate of Return (MIRR) on a BA II Plus, you first need to understand that this financial calculator does not have a dedicated MIRR key. This step answers the question: "What is the total cost of the project today, accounting for the time value of money?" Step 3: Solving for the MIRR With the future value of inflows (FV) and the present value of outflows (PV) calculated, you can now determine the MIRR.
Step 2: Calculating the Present Value of Outflows Next, you determine the present value of all negative cash flows (outflows). You will use the BA II Plus TVM solver to input each cash flow's value and its respective number of periods, calculating the future value at the specified reinvestment rate.
Step-by-Step Process for MIRR on BA II Plus
Unlike higher-end models, the BA II Plus requires you to perform the calculation using the built-in time value of money (TVM) functions and manual steps. 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.
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