What is Modified internal rate of return ?
Definition of Modified internal rate of return
Modified internal rate of return represents that beneficial money flows are reinvested at the company’s expense of capital, and the first outlays are funded at the company’s financing price.
Brief Explanation of Modified internal rate of return
The MIRR better shows the price and productivity of a project. The traditional inner amount of return represents the cash flows from a project are reinvested at the internal rate of return.
The computation is a solution to two big problems that are available with the popular internal rate of return computation. It is used to position investment strategies or tasks of imbalanced size. The first issue with an internal rate of return is that several solutions can be found for the same project. With the MIRR, only a single solution prevails for a given project, and reinvestment amount of beneficial cash flows is much more legitimate in exercise. The second issue is that the supposition that beneficial cash flows are reinvested at the MIRR is considered incorrect in exercise. There are available versions of the Modified internal rate of return which can be used for such evaluations. Like the interior amount of return, the MIRR is not legitimate for position tasks of different sizes, because a larger project with a smaller Modified internal rate of return may have a higher net present value.