Question
Grey Fox Aviation Company is analyzing a project that requires an initial investment of $2,500,000. The projects expected cash flows are: Year Cash Flow Year
Grey Fox Aviation Company is analyzing a project that requires an initial investment of $2,500,000. The projects expected cash flows are:
| Year | Cash Flow |
|---|---|
| Year 1 | $375,000 |
| Year 2 | 200,000 |
| Year 3 | 500,000 |
| Year 4 | 450,000 |
Grey Fox Aviation Companys WACC is 8%, and the project has the same risk as the firms average project. Calculate this projects modified internal rate of return (MIRR):
21.47%
-13.98%
19.08%
25.04%
If Grey Fox Aviation Companys managers select projects based on the MIRR criterion, they should (Accept/Reject) this independent project.
Which of the following statements about the relationship between the IRR and the MIRR is correct?
A typical firms IRR will be less than its MIRR.
A typical firms IRR will be equal to its MIRR.
A typical firms IRR will be greater than its MIRR.
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