The modified internal rate of return is designed primarily to analyze projects that
A)are financing rather than investing projects.
B)are mutually exclusive.
C)have positive and then negative cash flows following the initial cash flow.
D)have significantly different sizes.
E)are both mutually exclusive and have significantly different lives.

Question

Quizplus · Accepted Answer

The modified internal rate of return (MIRR) is used to analyze projects that involve positive and negative cash flows following the initial investment. This is because traditional IRR can sometimes overestimate the profitability of such projects. MIRR adjusts for this by assuming that positive cash flows are reinvested at a specified rate and negative cash flows are financed at a different rate. The other options listed do not align with the primary purpose of MIRR.

The Modified Internal Rate of Return Is Designed Primarily to Analyze