Suppose your firm is considering two independent projects with the cash flows shown as follows. The required rate of return on projects of both of their risk class is 12 percent, and the maximum allowable payback and discounted payback statistic for the projects are two and a half and three years, respectively.
$$\begin{array}{l}
\begin{array} {| l | l | l | l | l | }
\hline\text {Time: }&0&1&2&3\
\hline\text {Project A Cash flow:}&-5,000&1,000&3,000&5,000\
\hline\text {Project b Cash flow:}&-10,000&5,000&5,000&5,000\\hline
\end{array}
\end{array}$$
Use the MIRR decision rule to evaluate these projects; which one(s) should be accepted or rejected?
A) Accept both A and B
B) Accept neither A nor B
C) Accept A, reject B
D) Reject A, accept B

Question

Quizplus · Accepted Answer

Both projects A and B have positive MIRRs exceeding the required rate of return of 12%, indicating they are acceptable investments.

Suppose Your Firm Is Considering Two Independent Projects with the Cash