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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