I have come up with a discrepency between two versions of a cash flow analysis that I am trying to do with the MIRR function. In both cases, the total in flow and outflows add up the same amount. The only difference is that one is done using 4 total flows, the first being the entry, and then 3 annual cash flows. The other is done using 37 total flows, the first being entry and the other 36 being monthly flows with the mirr rate being multiplied by 12 to get an annualized rate. The only negative flow is the entry.

They add up to the same sum of inflows and outflows, but the output from MIRR is off by 2% between the two versions, and strangely enough, its the annual version that has a higher percentage than the monthly version. I would have expected the annual to be lower since the inflow for the year would have been pushed further forward in time, thus discounting the cash flow more then when cashed out earlier.

I also ran the same cash flows with the NPV function and also get two different present values using annual and monthly versions, again the annual value being HIGHER than the monthly value by a significant amount.

I would just like to understand what is causing this discrepency and why the monthly version is producing a lower MIRR rate and lower NPV than the annual version, all other things being equal. Anyone have any ideas?