Question

Fuzzy Button Clothing Company is analyzing a project that requires an initial investment of $400,000. The project's expected cash flows are: Cash Flow Year Year 1 Year 2 Year 3 Year 4 $325,000 -200,000 475,000 425,000 Fuzzy Button Clothing Company's WACC is 8%, and the project has the same risk as the firm's average project. Calculate this project's modified internal rate of return (MIRR): 28.70% 23.92% 21.53% 26.31% If Fuzzy Button Clothing Company's managers select projects based on the MIRR criterion, they should this independent project. Which of the following statements best describes the difference between the IRR method and the MIRR method? The IRR method uses only cash inflows to calculate the IRR. The MIRR method uses both cash inflows and cash outflows to calculate the MIRR

Answer 1

Year CF Year ICF 0 $(400,000.000 |-400000 1 $ 325,000.00 1 325000 2 $ (200,000.00) 2 -200000 3 $ 475,000.00 3 475000 4 $ 425,000.00 4 425000 MIRR_ 23.92% MIRR |=MIRR(B2:B6,8%,8%)

Accept

The correct statement is Statement 2