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Hello John,
“If the reinvestment rate is greater than the cost of capital, then MIRR will underestimate
the project’s true return” this is stated as a drawback of MIRR, but we can use a different reinvestment rate in MIRR right?
In the case here, we are evaluating two mutually exclusive projects. The argument for
using MIRR is therefore weak. Isn’t it that if projects are mutually exclusive, its better to use MIRR?The MIRR, like IRR, is biased towards projects with short payback periods, didn’t got this point. MIRR is consistent with NPV, then how it can be biased?
Thanks 🙂
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