NPV IRR are the most powerful among the others. However, both NPV and IRR have their limitations. NPV assumes periodic cash flows are reinvested at the NPV discount rate and IRR assumes reinvestment at the IRR. This assumption can lead to incorrect decision making and wrong choices of projects.In this regard, McKinsey & Co survey 30 executives in organizations that used IRR as a measure. They conclude the following:“If the IRR calculated to justify these investment decisions had been corrected for the measure’s natural flaws, management’s prioritization of its projects, as well as its view of their overall attractiveness, would have changed considerably (McKinsey & Co, 2004).”Modified Internal Rate of Return (MIRR) is seen as a measure which deals with the above criticism along with dealing with the problem of multiple IRR when cash flows move from positive to negative multiple times (Kierulff, 2008).What is the MIRR as a measure for investment decisions?can be used MIRR or how can we applay MIRR any other such measures beyond the NPV, IRR PBP and profitability index? It would be interesting to know and discuss.References is required for further reading
NPV IRR are the most powerful among the others. However, both NPV and IRR have their limitations. NPV assumes periodic cash flows are reinvested at the NPV discount rate and IRR assumes reinvestment at the IRR. This assumption can lead to incorrect decision making and wrong choices of projects.In this regard, McKinsey & Co survey 30 executives in organizations that used IRR as a measure. They conclude the following:“If the IRR calculated to justify these investment decisions had been corrected for the measure’s natural flaws, management’s prioritization of its projects, as well as its view of their overall attractiveness, would have changed considerably (McKinsey & Co, 2004).”Modified Internal Rate of Return (MIRR) is seen as a measure which deals with the above criticism along with dealing with the problem of multiple IRR when cash flows move from positive to negative multiple times (Kierulff, 2008).What is the MIRR as a measure for investment decisions?can be used MIRR or how can we applay MIRR any other such measures beyond the NPV, IRR PBP and profitability index? It would be interesting to know and discuss.References is required for further reading
NPV IRR are the most powerful among the others. However, both NPV and IRR have their limitations. NPV assumes periodic cash flows are reinvested at the NPV discount rate and IRR assumes reinvestment at the IRR. This assumption can lead to incorrect decision making and wrong choices of projects.In this regard, McKinsey & Co survey 30 executives in organizations that used IRR as a measure. They conclude the following:“If the IRR calculated to justify these investment decisions had been corrected for the measure’s natural flaws, management’s prioritization of its projects, as well as its view of their overall attractiveness, would have changed considerably (McKinsey & Co, 2004).”Modified Internal Rate of Return (MIRR) is seen as a measure which deals with the above criticism along with dealing with the problem of multiple IRR when cash flows move from positive to negative multiple times (Kierulff, 2008).What is the MIRR as a measure for investment decisions?can be used MIRR or how can we applay MIRR any other such measures beyond the NPV, IRR PBP and profitability index? It would be interesting to know and discuss.References is required for further reading
NPV IRR are the most powerful among the others. However, both NPV and IRR have their limitations. NPV assumes periodic cash flows are reinvested at the NPV discount rate and IRR assumes reinvestment at the IRR. This assumption can lead to incorrect decision making and wrong choices of projects.In this regard, McKinsey & Co survey 30 executives in organizations that used IRR as a measure. They conclude the following:“If the IRR calculated to justify these investment decisions had been corrected for the measure’s natural flaws, management’s prioritization of its projects, as well as its view of their overall attractiveness, would have changed considerably (McKinsey & Co, 2004).”Modified Internal Rate of Return (MIRR) is seen as a measure which deals with the above criticism along with dealing with the problem of multiple IRR when cash flows move from positive to negative multiple times (Kierulff, 2008).What is the MIRR as a measure for investment decisions?can be used MIRR or how can we applay MIRR any other such measures beyond the NPV, IRR PBP and profitability index? It would be interesting to know and discuss.References is required for further reading
