The modified internal rate of return compounds all of the cash flows at the:

1. Ordinary IRR assumes reinvestment at the project rate itself. 2. That assumption is the flaw the modified measure sets out to fix. 3. The MIRR compounds all cash flows at the cost of capital. 4. So the compounding rate is the cost of capital. _Source: OpenStax Principles of Finance (CC BY 4.0), Ch 16 'How Companies Think about Investing', sections 16.1-16.5_