The modified internal rate of return:
A)is used as the discount rate for all NPV calculations.
B)applies only to profitability calculations.
C)is used to make accept/reject decisions when no discount rate can be assigned.
D)is computed by combining cash flows until only one change in sign remains.
E)assumes all projects are financing projects.

Question

Quizplus · Accepted Answer

The modified internal rate of return (MIRR) is computed by combining cash flows until only one change in sign remains, which is different from the traditional IRR method. The MIRR is used to analyze the profitability of a project and is not necessarily the discount rate used in all NPV calculations. It is also not used to make accept/reject decisions when no discount rate can be assigned. The assumption that all projects are financing projects pertains to the equivalent annual annuity method (EAA).

The Modified Internal Rate of Return