What does Modified Internal Rate of Return on Equity Invested mean?
This is the discount rate used in the Debt Repayment analysis which compounds equity invested to final cash balance. Unlike the IRR and MIRR, which equalize future cash flows to the initial cash outlay, Modified Internal Rate of Return on Equity Invested looks at your final cash balance. The Reinvestment Rate DOES affect MIRREI. because this is the rate used in the calculation. The Reinvestment Rate is used in the Debt Repayment Analysis to reward cash balances that build up after debt service. The Reinvestment Rate will always be adjusted for After-Tax analysis. Mechanics of Debt Repayment Analysis: If you change ONLY the Reinvestment Rate, what will be affected are: Modified Return on Invested Equity (goes up with higher Reinvestment Rate and goes down with lower B/T Reinvestment Rate). 1) Debt at start of Year stays the SAME 2) Bank Interest for Year stays the SAME 3) The Cash at Start of Next Year will CHANGE, because End of Previous Year’s Cash Balance will have changed 4) Cash Fl
