A project costs $22,900 to initiate.It is expected to provide cash flows of $15,900 in Year 1 and $9,900 in Year 2.In Year 3,it will cost the firm $5,500 to end the project.What is the modified IRR at a discount rate of 14 percent?
A)-6.79%
B)-6.67%
C)10.63%
D)11.08%
E)14.00%

Question

Quizplus · Accepted Answer

Modified Year 2 cash flow = $9,900 + (-$5,500/1.14)= $5,075.44Modified IRR: $0 = -$22,900 + $15,900/(1 + IRR)+ $5,075.44/(1 + IRR)²Modified IRR = -6.79%

A Project Costs $22,900 to Initiate