Internal Rate of Return or Modified Internal Rate of Return

Abstract

From theoretical point of view net present value is the best technics for investment project evaluation. Internal rate of return is not able to solve situations with non-conventional cash flows and with mutually exclusive projects. Modified internal rate of return is more universal criterion. It does not use the iterative procedures and assumes that cash flows are reinvested at the firm’s required rate of return. Modified internal rate of return is so depend up required rate of return as net present value.