Which of the following statements is CORRECT? Assume that the project being considered has normal cash flows, with one cash outflow at t = 0 followed by a series of positive cash flows.
A) A project's MIRR is always less than its regular IRR.
B) If a project's IRR is greater than its cost of capital, then its MIRR will be greater than the IRR.
C) To find a project's MIRR, we compound cash inflows at the regular IRR and then find the discount rate that causes the PV of the terminal value to equal the initial cost.
D) To find a project's MIRR, the textbook procedure compounds cash inflows at the cost of capital and then finds the discount rate that causes the PV of the terminal value to equal the initial cost.
E) A project's MIRR is always greater than its regular IRR.

Question

Quizplus · Accepted Answer

The Modified Internal Rate of Return (MIRR) considers the cost of capital for reinvestment of cash inflows, unlike the regular IRR. The correct procedure for calculating MIRR involves compounding cash inflows at the project's cost of capital and then finding the discount rate that equates the present value of the terminal value to the initial investment.

Which of the Following Statements Is CORRECT? Assume That the Project