MIRR rankings of mutually exclusive projects with comparably sized initial investments will agree with the NPV rankings of those projects.

Question

Quizplus · Accepted Answer

MIRR (modified internal rate of return) is a capital budgeting technique that takes into account both the initial investment and the reinvestment of cash flows at a company's cost of capital. It has been shown that MIRR rankings of mutually exclusive projects with comparably sized initial investments will agree with the NPV (net present value) rankings of those projects. This is because both MIRR and NPV take into account the time value of money and provide a measure of the profitability of a project relative to the initial investment.

MIRR Rankings of Mutually Exclusive Projects with Comparably Sized Initial