Which one of the following is specifically designed to compute the rate of return on a project that has unconventional cash flows?
A)average accounting return
B)profitability index
C)internal rate of return
D)indexed rate of return
E)modified internal rate of return

Question

Quizplus · Accepted Answer

The modified internal rate of return (MIRR) is specifically designed to calculate the rate of return on a project with unconventional cash flows. Unlike the traditional internal rate of return (IRR), which assumes that cash flows are reinvested at the same rate as the IRR, the MIRR assumes that positive cash flows are reinvested at a finance rate, and negative cash flows are financed at a borrowing rate. This makes MIRR a more accurate measure of a project's true rate of return.

Which One of the Following Is Specifically Designed to Compute