Pros and cons of MIRR
Pros of MIRR
As a more accurate indicator of the profitability of a future project, MIRR can be used by traders to assess whether or not any predictions made by IRR are overly optimistic.
MIRR resolves an inherent problem of the IRR calculation as it assumes that all cashflows are reinvested at the reinvestment rate, which is more accurate than cashflows being reinvested at the IRR.
Cons of MIRR
A limitation of MIRR is that a trader will need to work from an estimate of the cost of capital in order to make a decision.
MIRR is also a difficult concept for those without a financial background to grasp, and there is dispute over the theoretical background for the MIRR calculation within academic circles. However, MIRR is often thought to be more accurate than IRR and other similar calculations.