Minimum Internal Rate of Return (MIRR)
This method depends on calculating the value of D. Let the NPV equal zero, so that it will be calculated by the trial and error method.
NPV = NCF1 (1 + О)’1 + NCF2 (1 + D)“2
+….. + NCFn( + D)n (3.8)
By knowing the NCF and setting the NPV is equal to zero, the value of D emerges as the projected interest rate of return that the company, organization, or individual investor will achieve after implementing the project. Every company should have defined their own minimum rate of return (MIRR). This rate is internal and specific to each company. For most international petroleum companies with branches in more than one country around the world, that number varies from country to country.
This number is determined after studies and many researches specific to each country according to the description of the political, social, and economic condition of that country. For example,
Figure 3.3 Calculate IRR.
investing in England or the USA is certainly different from Sudan, Nigeria or other African countries that lack political stability.
The internal minimum of return number is a secret and confidential number for each company, as these numbers govern their investment.