Bang Trevor

money. The modified IRR has all the virtues of the IRR, but (1) it incorporates a better reinvestment rate assumption, and (2) it avoids the multiple rate of return problem. The PI measures profitability relative to the cost of a project—it shows the “bang per buck.” Like the IRR, it gives an indication of the project’s risk, because a high PI means that cash flows could fall quite a bit and the project would still be profitable. The different measures provide different types of information…