A capital budgeting technique that converts a project's cash flows using a more consistent reinvestment rate prior to applying the Internal Rate of Return, IRR, decision rule.
A) discounted payback
B) net present value
C) modified internal rate of return
D) profitability index

Question

Quizplus · Accepted Answer

The technique described is the Modified Internal Rate of Return (MIRR). MIRR addresses the reinvestment rate assumption problem that can occur with the traditional IRR method. Both discounted payback and net present value do not address this issue, while profitability index is a different method altogether.

A Capital Budgeting Technique That Converts a Project's Cash Flows