Modified Internal Rate of Return
Glossary of Terms Related to Commercial Mortgages and Loans
"The Modified Internal Rate of Return (MIRR) is used to correct a significant inherent problem with the IRR calculation. The IRR formula assumes that you are reinvesting the annual cash flow at the same rate as calculated by the IRR. As a result, when you have a property that generates significant cash flow, the calculated IRR will overstate the likely financial return of the property. The MIRR allows you to enter a different rate that is applied to the property's annual cash flow. Using the MIRR will more closely mimic the real rate of return since operating cash flow is rarely invested at a higher rate than a bank savings rate. The finance rate is the annual interest rate paid to borrow money during years the property experiences a negative cash flow. The reinvestment rate is the rate of return earned on the excess cash flow that is generated by the property." (Quoted from: Wikipedia contributors. Modified Internal Rate of Return. Wikipedia, The Free Encyclopedia, 14 April 2006 18:26 UTC http://en.wikipedia.org/w/index.php?title=Modified_Internal_Rate_of_Return&oldid=48450489 , Page Version ID: 48450489)"
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