17. Look again at the project cash flows in Problem 10 . Calculate the modified IRR as defined in Footnote 4 in Section 5.3 . Assume the cost of capital is 12%.

Now try the following variation on the MIRR concept. Figure out the fraction x such that x times C 1 and C 2 has the same present value as (minus) C 3 .

xC1 xC2 1.12 2

C3 1.122 Define the modified project IRR as the solution of C0 1 1 x 2 C1 1 IRR 1 1 x 2 C2 1 1 IRR 2 2 0

Now you have two MIRRs. Which is more meaningful? If you can’t decide, what do you conclude about the usefulness of MIRRs?