MIRR and NPV Your company is considering two mutually exclusive projects, X and Y, whose costs and cash flows are shown below:
Year | X | Y |
---|---|---|
0 | -$5,000 | -$5,000 |
1 | 1,000 | 4,500 |
2 | 1,500 | 1,500 |
3 | 2,000 | 1,000 |
4 | 4,000 | 500 |
The projects are equally risky, and their cost of capital is 12%. You must make a recommendation, and you must base it on the modified IRR (MIRR).
Calculate the two projects' MIRRs. Round your answers to two decimal places. Project X % Project Y % Which project has the higher MIRR?
Modified Internal rate of return: The Modified Internal Rate of Return (MIRR) is similar to the regular IRR, except it is based on the assumption that cash flows are reinvested at weighted average cost of capital.
There are two mutually exclusive projects, Project X and Project Y for which cash flows are given. The cost of capital is 12% for both the projects.
Calculate MIRR for both the Projects as follows:
Formulas for above values are as follows:
Therefore, MIRR for Project X is and MIRR for Project Y is
. The MIRR for Project Y is higher than MIRR for Project X.
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MIRR and NPV Your company is considering two mutually exclusiveprojects, X and Y, whose costs...
MIRR and NPV Your company is considering two mutually exclusive projects, X and Y, whose costs and cash flows are shown below: Year X Y 0 -$5,000 -$5,000 1 1,000 4,500 2 1,500 1,500 3 2,000 1,000 4 4,000 500 The projects are equally risky, and their cost of capital is 14%. You must make a recommendation, and you must base it on the modified IRR (MIRR). Calculate the two projects' MIRRs. Do not round intermediate calculations. Round your answers...
MIRR and NPV Your company is considering two mutually exclusive projects, X and Y, whose costs and cash flows are shown below: Year X Y 0 -$5,000 -$5,000 1 1,000 4,500 2 1,500 1,500 3 2,000 1,000 4 4,000 500 The projects are equally risky, and their cost of capital is 13%. You must make a recommendation, and you must base it on the modified IRR (MIRR). Calculate the two projects' MIRRs. Do not round intermediate calculations. Round your answers...
MIRR and NPV Your company is considering two mutually exclusive projects, X and Y, whose costs and cash flows are shown below: Year X Y 0 -$5,000 -$5,000 1 1,000 4,500 2 1,500 1,500 3 2,000 1,000 4 4,000 500 The projects are equally risky, and their cost of capital is 15%. You must make a recommendation, and you must base it on the modified IRR (MIRR). Calculate the two projects' MIRRs. Do not round intermediate calculations. Round your answers...
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