Compute the MIRR statistic for Project J and advise whether to accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 10 percent.
Project J
$$\begin{array} { l l l c c c c }
\text { Time } & 0 & 1 & 2 & 3 & 4 & 5 \
\text { Cash Flow } & - \$ 1,000 & \$ 300 & \$ 1,480 & - \$ 500 & \$ 300 & - \$ 100
\end{array}$$
A) The project's MIRR is 14.77 percent and the project should be accepted.
B) The project's MIRR is 9.29 percent and the project should be rejected.
C) The project's MIRR is 13.76 percent and the project should be accepted.
D) The project's MIRR is 15.31 percent and the project should be accepted.

Question

Compute the MIRR statistic for Project J and advise whether to accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 10 percent.
Project J
$$\begin{array} { l l l c c c c } 
\text { Time } & 0 & 1 & 2 & 3 & 4 & 5 \
\text { Cash Flow } & - \$ 1,000 & \$ 300 & \$ 1,480 & - \$ 500 & \$ 300 & - \$ 100
\end{array}$$
A) The project's MIRR is 14.77 percent and the project should be accepted.
B) The project's MIRR is 9.29 percent and the project should be rejected.
C) The project's MIRR is 13.76 percent and the project should be accepted.
D) The project's MIRR is 15.31 percent and the project should be accepted.

Quizplus · Accepted Answer

The MIRR is calculated by finding the future value of positive cash flows at the reinvestment rate (10%) and the present value of negative cash flows at the finance rate (10%), then solving for the rate that equates these values. The MIRR of 13.76% is greater than the cost of capital (10%), so the project should be accepted.

Compute the MIRR Statistic for Project J and Advise Whether