Your company is considering two mutually exclusive projects, X
and Y, whose costs and cash flows are shown below:
Year 
X 
Y 
0 
−$2,000 
−$2,000 
1 
200 
2,000 
2 
600 
200 
3 
800 
100 
4 
2,400 
75 
The projects are equally risky, and the firm's required rate of return is 12 percent. You must make a recommendation, and you must base it on the modified IRR. What is the MIRR of the best project?
a. 
12.00% 

b. 
12.89% 

c. 
11.46% 

d. 
13.59% 

e. 
21.29% 
Answer: e) 21.29%
The best project of the two is one which has a higher NPV. This project adds a higher value to the firm.
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