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Modified IRR assumes that positive cash flows are reinvested at the firm's cost of capital, and the initial outlays are financed at the firm's financing cost. On the other hand simple internal rate of return (IRR) assumes the cash flows from a project are reinvested at the IRR. Basic difference is in the mode of re-investment (Rate) Therefore, MIRR more accurately reflects the cost and profitability of a project.
The Modified Internal Rate of Return (MIRR) is a financial measure of an investment's attractiveness.It is used in capital budgeting to rank alternative investments of equal size. As the name implies, MIRR is a modification of the internal rate of return (IRR) and as such aims to resolve some problems with the IRR.
modified IRR assumes that positive cash flows are reinvested at the firm's cost of capital, and the initial outlays are financed at the firm's financing cost. Therefore, MIRR more accurately reflects the cost and profitability of a project.
