Change in finance_rate Argument Doesn't Affect MIRR Result

Last reviewed: November 30, 1994
Article ID: Q76359

The information in this article applies to:

Microsoft Excel for Windows, versions 2.x, 3.0, 4.0, 5.0
Microsoft Excel for OS/2, versions 2.2, 3.0
Microsoft Excel for the Macintosh, versions 3.0, 4.0, 5.0

SUMMARY

When using the MIRR function in Microsoft Excel, the value for the finance_rate argument can be changed to any value. It will not affect the result for an investment with only one change in sign for the cash flows. This is by design and is consistent with the formula for the Modified Internal Rate of Return (MIRR).

MORE INFORMATION

The MIRR function requires the following arguments:

   MIRR(values,finance_rate,reinvest_rate)

It also requires values that have at least one change in sign. It is ideally used for investments with values with two or more changes in sign.

Steps to Reproduce Behavior

Type this example into a worksheet:

      A1:  -120,000
      A2:    39,000
      A3:    30,000
      A4:    21,000
      A5:    37,000
      A6:    46,000
      A7: =MIRR(A1:A6,10%,12%).

12.61% is displayed when the cell is formatted with number format 0.00%.
Now change the 10% to a different value such as 5%. The result of 12.61% will not change.

A change in the value of the finance_rate argument will only affect the result of the MIRR function for an investment with multiple changes in the signs of the cash flows.

REFERENCES

"Online Help," version 5.0 "Function Reference," version 4.0, pages 276-277 "Function Reference," version 3.0, page 154 "Functions and Macros," version 2.1, pages 84-85

KBCategory: kbusage
KBSubcategory:
Additional reference words: 2.0 2.00 2.01 2.1 2.10 2.2 2.20 2.21 3.0
3.00 4.0 4.00 4.0a 4.00a 5.0 5.00

THE INFORMATION PROVIDED IN THE MICROSOFT KNOWLEDGE BASE IS PROVIDED "AS IS" WITHOUT WARRANTY OF ANY KIND. MICROSOFT DISCLAIMS ALL WARRANTIES, EITHER EXPRESS OR IMPLIED, INCLUDING THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL MICROSOFT CORPORATION OR ITS SUPPLIERS BE LIABLE FOR ANY DAMAGES WHATSOEVER INCLUDING DIRECT, INDIRECT, INCIDENTAL, CONSEQUENTIAL, LOSS OF BUSINESS PROFITS OR SPECIAL DAMAGES, EVEN IF MICROSOFT CORPORATION OR ITS SUPPLIERS HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. SOME STATES DO NOT ALLOW THE EXCLUSION OR LIMITATION OF LIABILITY FOR CONSEQUENTIAL OR INCIDENTAL DAMAGES SO THE FOREGOING LIMITATION MAY NOT APPLY.

Last reviewed: November 30, 1994
© 1998 Microsoft Corporation. All rights reserved. Terms of Use.