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# Difference between internal rate of return and modified internal rate of return.

The major differences between internal rate of return (IRR) and modified internal rate of return are as follows −

Internal rate of return (IRR)

- Calculates discount rate based on internal factors.
- NPV = 0.
- Cash flows are Reinvested at project’s IRR.
- Provides two solutions.
- Less accurate.
- Higher than MIRR.
- Low precision.

Modified internal rate of return

- Cost of capital is used in calculations.
- NPV = investment (outflow).
- Cash flows are reinvested at firm rate of return.
- Provides one solution.
- More accurate.
- More realistic than IRR.
- High precision.

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