USE OF MIRR AS TOOL FOR APRRAISING RELATIVE PROFITABILITY

Iuliana Militaru
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Iuliana Militaru: Romanian - American University, Bucharest, Romania

Journal of Financial and Monetary Economics, 2023, vol. 11, issue 1, 182-188

Abstract: The efficiency of investment financing sources at the microeconomic level is an approach whose successful achievement also requires the most efficient use of financing sources. The measurement of this efficiency is carried out with the help of specific indicators - among which MIRR stands out, namely for management interested in quantifying relative profitability, on one hand, and for long term use of corporate governance – inter alia, of capital budgeting, on the other hand. We must, however, observe MIRR assumes cash inflows are reinvested at WACC, which, again, is – or, at least, must be – a crucial component of corporate governance: the inverse proportional relationship between the calculated value of WACC and the value of the firm means the minimum value of WACC corresponds to the peak of the growth trend (maximum) of the firm's value.

Keywords: Modified Internal Rate of Return (MIRR); profitability; investment decision (search for similar items in EconPapers)
JEL-codes: G31 G32 (search for similar items in EconPapers)
Date: 2023
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