The two fatal flaws of the internal rate of return rule are
A rate of return for which this function is zero is an internal rate of return. Given the (period, cash flow) pairs (n, C n) where n is a positive integer, the total number of periods N, and the net present value NPV, the internal rate of return is given by r in: The modified internal rate of return (MIRR) is a financial measure of an investment ‘s attractiveness. It is used in capital budgeting to rank alternative investments of equal size. As the name implies, MIRR is a modification of the internal rate of return (IRR) and as such aims to resolve some problems with the IRR. The advantages and disadvantages of the internal rate of return are important to understand before applying this technique to specific projects. There must be a proper analysis conducted and an interpretation of most projects by this well-known technique of evaluation and selection of investment projects.