Question

# A firm is considering two mutually exclusive projects, X and Y, with the following cash flows:...

A firm is considering two mutually exclusive projects, X and Y, with the following cash flows:

 0 1 2 3 4
 Project X -\$1,000 \$90 \$300 \$430 \$700 Project Y -\$1,000 \$1,100 \$100 \$45 \$50

The projects are equally risky, and their WACC is 11%. What is the MIRR of the project that maximizes shareholder value? Round your answer to two decimal places.

 1 2 3 4 FV of Cash flows Project X \$90.00 \$300.00 \$430.00 \$700.00 Project Y \$1,100.00 \$100.00 \$45.00 \$50.00 FV @ 11% 1.5181 1.3676 1.2321 1.1100 FV Project X \$136.63 \$410.29 \$529.80 \$777.00 \$1,853.72 FV Project Y \$1,669.88 \$136.76 \$55.44 \$55.50 \$1,917.59 MIRR = (Future Value of Positive Cash Flows at the Cost Of Capital of the Firm / Present Value of all Negative Cash Flows at the Financing Cost of the Firm)^(1/n) – 1 Project X = [(\$1853.72/1000)^(1/4)]-1 16.68% Project Y = [(\$1917.59/1000)^(1/4)]-1 17.68%

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