- Related Questions & Answers
- Difference between internal rate of return and modified internal rate of return.
- Differentiate between rate of interest and internal rate of return.
- Differentiate between discounted Net present value and Internal rate of return.
- Explain the concept of machine hour rate depreciation method.
- Explain various departmental overheads used in machine hour rate of depreciation.
- How to find the rate of return for a vector values in R?
- Explain Java Virtual Machine's Internal Architecture
- Explain the internal chip organization in computer architecture?
- What is Accounting Rate of Return in discounted cash flow technique in capital budgeting?
- Internal working of Python
- Differences between Bit Rate and Baud Rate
- A modified game of Nim in C ?
- Compare marginal tax rate and effective tax rate.
- Compare fixed interest rate and floating interest rate
- Write the difference between discount rate and interest rate.

- Selected Reading
- UPSC IAS Exams Notes
- Developer's Best Practices
- Questions and Answers
- Effective Resume Writing
- HR Interview Questions
- Computer Glossary
- Who is Who

Modified internal rate of return (MIRR) is the adjusted rate of return to eliminate difference between investment rate and return. MIRR sorted out some issues in internal rate of return (IRR). MIRR tells about viability of the project. If the result is more than expected return, then the projects will be considered. MIRR is more accurate than IRR.

Formula

$$MIRR =\sqrt[n]{\frac{FVc}{PVc}}-1$$

Here,FVc= future value of cash flow,PVc= present value of cash flow and n = No. Of periods.

FVc Is positive cash flow that is discounted at reinvestment rate.

PVc Is negative cash flow that is discounted at financing rate.

Advantages of modified internal rate of return are −

- One solution (unlike in IRR, it has two solutions).
- Investment sensitivity is measured.

Disadvantages of modified internal rate of return are −

- Not easy to understand.
- In some cases, decision making is difficult or up to mark.

Advertisements