Asked by Mandi Nazimi on Jun 27, 2024
Verified
If a project's modified internal rate of return is above the cost of capital, it should be rejected.
Modified Internal Rate
A version of the internal rate of return (IRR) adjusted for scale and risk, providing a more accurate reflection of an investment's profitability.
Cost of Capital
The critical rate of return a firm is required to earn on investment projects to hold its market stance and entice financiers.
- Gain an understanding of the essential aspects of the Internal Rate of Return (IRR) and Modified Internal Rate of Return (MIRR), and identify their variations.
Verified Answer
SR
Stephanie RicciJun 29, 2024
Final Answer :
False
Explanation :
A project's modified internal rate of return (MIRR) being above the cost of capital indicates that the project is generating returns greater than the cost of funds used to finance it, making it a desirable investment. Therefore, it should not be rejected.
Learning Objectives
- Gain an understanding of the essential aspects of the Internal Rate of Return (IRR) and Modified Internal Rate of Return (MIRR), and identify their variations.