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I cant understand the following assumption;
“Traditional internal rate of return (IRR) assumes the cash flows from a project are reinvested at the IRR itself.”
“The modified internal rate of return (MIRR) assumes that positive cash flows are reinvested at the firm’s cost of capital”
In the first definition, What does it mean by “reinvested at the irr itself”? please give a practical example ?
Also give an example on Modified IRR 🙁
Neither the IRR or the MIRR are examinable in Paper PM!!!
The IRR is in the syllabus for Papers MA, FM and AFM.
The MIRR is examinable only in Paper AFM.
My free lectures for Paper AFM answer your question, with examples.