A project is expected to have annual cash flows of $22,400,$13,600 and -$4,200 for Years 1 to 3,respectively.The initial cash outlay is $27,500 and the discount rate is 12 percent.What is the modified IRR?
A)13.12%
B)13.22%
C)2.73%
D)8.67%
E)9.75%

Question

Quizplus · Accepted Answer

Modified Year 2 cash flow = $13,600 + (-$4,200)/1.12 = $9,850Modified IRR: $0 = -$27,500 + $22,400/(1 + IRR)+ $9,850/(1 + IRR)² = 13.12%

A Project Is Expected to Have Annual Cash Flows of $22,400,$13,600