Which statement about a project's MIRR 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 greater than its regular IRR.
B)A project's MIRR is always less than its regular 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 WACC and then finds the discount rate that causes the PV of the terminal value to equal the initial cost.

Question

Quizplus · Accepted Answer

The Modified Internal Rate of Return (MIRR) is calculated by compounding the project's cash inflows at the project's cost of capital (often the Weighted Average Cost of Capital, WACC) to the end of the project and then finding the discount rate that equates this terminal value to the project's initial cost. This method addresses some of the reinvestment rate assumptions inherent in the traditional IRR calculation.

Which Statement About a Project's MIRR Is Correct? Assume That