Modified internal rate of return:
A) handles the multiple IRR problem by combining cash flows until only one change in sign change remains.
B) requires the use of a discount rate.
C) does not require the use of a discount rate.
D) Both handles the multiple IRR problem by combining cash flows until only one change in sign change remains; and requires the use of a discount rate.
E) Both handles the multiple IRR problem by combining cash flows until only one change in sign change remains; and does not require the use of a discount ratE.

Question

Quizplus · Accepted Answer

The modified internal rate of return handles the multiple IRR problem by combining cash flows until only one change in sign change remains, but it also requires the use of a discount rate. Therefore, option D is correct as it includes both statements. Options A and E are incorrect as they only partially describe the features of MIRR. Option B is incorrect as it suggests that MIRR does not consider a discount rate which is incorrect. Option C is also incorrect as MIRR does require the use of a discount rate.

Modified Internal Rate of Return