Cool Water Drinks is considering a proposed project with the following cash flows. Should this project be accepted based on the combined approach to the modified internal rate of return if both the discount rate and the reinvestment rate are 12.6 percent? Why or why not?

A)Yes; The MIRR is 8.81 percent.
B)Yes; The MIRR is 9.23 percent.
C)No; The MIRR is 8.81 percent.
D)No; The MIRR is 9.06 percent.
E)No; The MIRR is 9.23 percent.

Question

Cool Water Drinks is considering a proposed project with the following cash flows. Should this project be accepted based on the combined approach to the modified internal rate of return if both the discount rate and the reinvestment rate are 12.6 percent? Why or why not?

A)Yes; The MIRR is 8.81 percent. 
B)Yes; The MIRR is 9.23 percent. 
C)No; The MIRR is 8.81 percent. 
D)No; The MIRR is 9.06 percent. 
E)No; The MIRR is 9.23 percent.

Quizplus · Accepted Answer

Using the modified internal rate of return with a discount rate and a reinvestment rate both at 12.6%, we find that the MIRR is 8.81%. This is lower than the required rate of return, so the project should not be accepted. Therefore, the best choice is C.

Cool Water Drinks Is Considering a Proposed Project with the Following