Asked by Jackson Lukens on May 17, 2024
Verified
MIRRs are generally lower and more realistic than the IRRs.
MIRRs
Modified Internal Rate of Return (MIRR) is a financial metric used to assess the profitability of investments, adjusting the internal rate of return (IRR) to account for differences in the reinvestment rate and financing costs.
IRRs
Internal Rate of Return; a financial metric used to estimate the profitability of potential investments, calculated as the discount rate that makes the net present value of all cash flows equal to zero.
- Acquire knowledge of the foundational elements of the Internal Rate of Return (IRR) and Modified Internal Rate of Return (MIRR), including how they differ.
Verified Answer
RE
Rossie EspinoMay 22, 2024
Final Answer :
True
Explanation :
MIRRs take into account the reinvestment rate of cash flows, which is more realistic than assuming the same rate of return as the initial investment (as with IRRs). Therefore, MIRRs tend to be lower and more accurate representations of the potential profitability of an investment.
Learning Objectives
- Acquire knowledge of the foundational elements of the Internal Rate of Return (IRR) and Modified Internal Rate of Return (MIRR), including how they differ.