a) Your company is considering two mutually exclusive projects, X and Y, whose costs and cash flows are shown below:

Year

0 1 2 3 4

Project X Cash flow ($) -$2,000 200 600 800 1,400

Project Y Cash flow ($) -$2,000 2,000 200 100 75

The projects are equally risky, and the required rate of return is 12 percent. Based on the Modified Internal Rate of Return (MIRR), you must make a recommendation which project is the better project. Explain your answer.

(6 marks)

2. b) Explain TWO (2) advantages of Modified Internal Rate of Return (MIRR) over

   Internal Rate of Return (IRR).

   (4 marks)