Question

What is the purpose of the Modified Internal Rate of Return (MIRR) technique?

a.

To assume interim positive cash flows are reinvested at the project's rate

b.

To overcome the drawbacks of the Net Present Value (NPV) method

c.

To assume interim positive cash flows are reinvested at the firm's rate of return

d.

To calculate the present value of terminal values

Posted under IC 89 Management Accounting

Answer: (c).To assume interim positive cash flows are reinvested at the firm's rate of return Explanation:The purpose of the Modified Internal Rate of Return (MIRR) technique is to assume that interim positive cash flows are reinvested at the firm's rate of return, overcoming the unrealistic assumption of IRR.

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Q. What is the purpose of the Modified Internal Rate of Return (MIRR) technique?
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