A technique that solves some of the problems presented by IRR.
A) NPV
B) MIRR
C) Adjusted IRR
D) SWOT

Question

Quizplus · Accepted Answer

MIRR (Modified Internal Rate of Return) is a technique that solves some of the problems of IRR, particularly the multiple root problem and reinvestment rate assumption. MIRR assumes that all cash flows are reinvested at the firm's cost of capital, which reflects the realistic conditions in which the firm operates. Therefore, MIRR produces a more accurate rate of return than IRR. NPV is a useful technique but does not solve IRR's problems. Adjusted IRR refers to various versions of IRR that adjust for different assumptions, but MIRR is preferred over IRR. SWOT is a strategic planning tool and has nothing to do with financial analysis.

A Technique That Solves Some of the Problems Presented by IRR