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Hi everyone! Could please someone help with modified IRR – what is it and how do you think it will be tested in P5? BPP says it is new to the syllabus. I would appreciate if you advise me some source to read about it. I guess it’s on P4 syllabus but I’m not taking it.
Thanks in advance!
IRR assumes that flows are reinvested at IRR, which is not realistic.
MIRR assumes that flows are reinvested at cost of capital, which is more realistic
IRR can produce different results when interpolating with different values
MIRR gives just 1 result.
Formula, give in the exam is:
[(PV return phase / PV Inv phase)]^1/n]x(1+i) – 1
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