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

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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.
raja
Published on 26-Sep-2020 17:10:47
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