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. On the BA II Plus, you input the FV as a positive number and PV as a negative number into the TVM solver, set N to the project duration, and then press the "CPT" and "I/Y" keys to solve for the interest rate, which is your MIRR.
Input FV Positive PV Negative BA II Plus
It is often efficient to calculate these sequentially, using the "FV" register to accumulate the total future value of all inflows. On the BA II Plus, you input these cash flows as negative numbers and solve for the present value.
This step effectively answers the question: "What is the total value of all cash inflows at the end of the project if they are invested at the cost of capital?" Handling Multiple Cash Flows If your project has multiple positive cash flows at different points in time, you must calculate the future value of each one individually. The formula requires you to take the Nth root of the ratio of FV to PV, where N is the total number of periods.
Input FV Positive PV Negative BA II Plus
This provides a more realistic rate of return compared to the standard IRR, which assumes cash flows are reinvested at the IRR itself. 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.
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