StuartCo is now considering two independent projects utilizing the internal rate of return technique. Project A has an initial investment of $120,000 and cash inflows at the end of each of the next four years of $40,000. Project B has an initial investment of $80,000 and cash inflows at the end of each of the next five years of $25,000.

What projects should be accepted if the cost of capital is 15%? 

What projects should be accepted if the cost of capital is 10%?

 

2. Your boss attended a conference and heard about the modified IRR.  He decides that this is what the company should use to analyze projects. The project he wants analyzed has a cost of $1,000 at Time = 0 and inflows of $300 at the end of Years 1-5. The new cost of capital is 10%. 

He asks you to calculate the project's modified IRR (MIRR).