When determining a project's true profitability, it is normally better to compute the project's modified internal rate of return (MIRR) rather than its internal rate of return (IRR) because the MIRR technique:
A. considers only the cash flows after the project's payback period.
B. has a decision rule that is easier to apply than the IRR decision rule.
C. assumes that the project's cash flows are reinvested at the firm's required rate of return, whereas IRR assumes the cash flows are reinvested at the project's IRR.
D. assumes that the project's cash flows are reinvested at the risk-free rate.
E. assumes that the project's cash flows are discounted at its IRR.
Answer: C
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