# Calculating MIRR (Modified Internal Rate Of Return) Using Python And Numpy

## Overview:

• While the IRR - Internal Rate of Return for a set of cash flows assume the same discount rate for both positive and negative cash flows, the Modified Internal Rate of Return assumes different discount rates for them.
• Since the external factors like inflation is not included in both IRR and MIRR calculation, in MIRR the discount rate for a positive cash flow (i.e., in flow) is typically less than the discount rate for a negative cash flow. Hence, MIRR is considered the more conservative and realistic when compared to IRR.
• Both the techniques are applied and results are compared while assessing the return potential of an investment.

## Example:

 # Example Python program that calculates the Modified # Internal Rate of Return on a set of cashflows(sometimes positive and sometimes negative) # resulting from an initial investment   import numpy as np   t0  = -500; # Negative as t0 is an outflow t1  = 30; t2  = 50; t3  = -10; t4  = 20; t5  = -5;   # All the cash flows as a Python list cashFlows = [t0, t1, t2, t3, t4, t5];   # Calculate the Modified Internal Rate of Return mirr = round(np.mirr(cashFlows, 5, 6), 4);   print("Modified Internal Rate of Return:%3.4f"%mirr);

## Output:

 Modified Internal Rate of Return:1.8209