Internal Rate of Return vs Modified Rate of Return

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This described the differences between these financial terms in order to make then clear for the student

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Internal Rate of Return
The Internal Rate of Return, or IRR, is a measure of an investment that takes
into account internal factors. It is used to indicate efficiently, quality, and/or
the yield of an investment. This is important to a company or business'
investors and owners as they use this to measure whether an investment will
be greater than the actual cost or capital that they will put into a project.
Modified Internal Rate of Return
The Modified Internal Rate of Return, or MIRR, is just as the name implies - it
is a modified type of method that covers the limitations of the IRR. While the
same steps are taken, the MIRR goes a step further by examining the
reinvestment of positive cash flows that a company does with the money it
receives. This allows for a more accurate account of the budget that a project
would bring to a company's investors and owners.
IRR assumes the reinvestment rate would be equal to internal rate of return
which is 23%, but in MIRR calculations, reinvestment rate have been taken
equal to finance rate which is 12%.
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20000
IRR
MIRR

10000
23%
19%

10000

10000

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