What is a modified internal return rate?

modified internal return rate is one way to assess the asset. It allows investors to compare between different investment opportunities based on their expected revenues. It is one of several measures that manipulate the same data in different ways. Others include pure present value and internal return rate. Analysts choose which measures to apply on the basis of their own belief in the accuracy and relevance of everyone. If it is positive, the project is profitable; If it is negative, the project costs more than it returns. The internal return rate is the maximum discount rate at which the project will still be profitable. The modified internal return rate is of the same meaning, but is calculated by means of a modified cash flow: all expected payments are together and considered received as a lump -sum on the last period. For this formula, one investment in the lump must occur in the project: expenses.

6 The investment phase consists of a period during which the investor determines the funds. The return phase is the time over which it receives revenues from its investment. When calculating the modified internal return rate, the return includes only the terminal payment.

formula promoted internal return rate of return corresponds to a percentage. Basically, they set the pure current value straight zero and solved the discount rate. Investors can observe a modified internal return rate and compare it to a discount rate that you consider to be suitable for the project. If the proposed discount rate is lower than the modified internal return rate, the project will be profitable.

Modified inner return rate is easier to calculate than the pure current value or internal return rate, and some analysts prefer it for this reason. It is also less demanding than the internal return rate that assumes that all project revenue is reinvested directly d dabout the project. Relaxation of this assumption reflects real investment procedures more precisely.