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Problem 10-11MIRR and NPV Your company is considering two mutually exclusive projects, X and Y, whose costs and cash flows are shown below: Year X
Problem 10-11MIRR 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). Which project has the higher MIRR?
The ANSWER IS: MIRRx = 17.49%
MIRRy = 18.39%
SHOW ALL WORK AND FORMULAS TO SUPPORT ANSWER
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