Sunday, August 23, 2009

Modified internal rate of return

Hello friends. Meeting you all after a long time. You are all aware of the concept of Internal Rate of Return (IRR). It is return in percentage from investment. Or return from Rs 100 of investment. Though very popular due to ease in interpretation, it has certain limitations due to the restrictive reinvestment assumption. That is, the IRR assumes that the ivestment gives the return when the annual returns are reinvested o fetch returns @ IRR. Hence, Modified IRR concept was suggested in literature. An excel function also is available to compute it. However, the MIRR was hardly applied in Indian siutuations. In the following paper, I applied the method to watershed data. I also demonstrated the method suggested by Cary and Dunn (1997) to adjust MIRR for scale and time span differences across projects we compare.

Frankly the attempt is direct adoption of known method and I did not make any original contribution. Please read and give your comments.
Thank u all