Calculate net present value and internal rate of return for investment cash flows with MIRR, payback period, and profitability index.
Investment cash flows can look attractive by total dollars while losing value after timing is considered. This calculator treats the first cash flow as period zero, discounts later entries at the selected per-period rate, and reports NPV, IRR, MIRR, payback period, and profitability index. MIRR also uses financing and reinvestment rates. The frequent mistake is mixing time units: a monthly cash-flow series needs monthly rates, while results such as IRR are also per month unless converted to an annual rate.
A concrete input and expected output from the current implementation.
Input
Cash flows by period: -100, 60, 40 Discount rate: 10% Finance rate: 10% Reinvestment rate: 10%
Expected output
NPV = -12.40; IRR = 0.00%; MIRR = 2.96%; payback period = 2 periods; profitability index = 0.88.
NPV is -100 + 60/1.10 + 40/1.10^2 = -12.3967. IRR is 0.00%: at a zero discount rate NPV equals the undiscounted total (-100 + 60 + 40 = 0), and the IRR equation 100 = 60/(1+r) + 40/(1+r)^2 is satisfied at r = 0; MIRR is (106/100)^(1/2)-1, payback occurs after the second inflow, and the profitability index is 87.6033/100.
The period-zero cash flow is not discounted. Every subsequent cash flow is divided by one plus the discount rate raised to its period number, and those present values are added to the initial flow to obtain NPV. For a conventional investment with one initial outlay, the profitability index compares the present value of later inflows with that outlay.
IRR is the per-period rate that makes NPV equal to zero. MIRR instead discounts negative flows at the financing rate, compounds positive flows at the reinvestment rate, and calculates one return across the full series. Payback accumulates undiscounted cash flows until the initial deficit is recovered, reporting the recovery point in cash-flow periods.
Only when each cash-flow period is one year. With monthly entries, the IRR is monthly; with quarterly entries, it is quarterly. Multiplying a periodic IRR by the number of periods gives a nominal approximation, not an effective annual return. For compounding, convert it with (1 + periodic rate) raised to the number of periods per year, minus 1.
No. IRR is useful for expressing a break-even discount rate, but project scale, timing, and unusual sign changes can make comparisons misleading. NPV states the value added at a chosen required return, while MIRR supplies explicit financing and reinvestment assumptions. Review those measures together and confirm that both projects use the same period length and assumptions.
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