Blue Water Systems is analyzing a project with the following cash flows. Should

Question

Blue Water Systems is analyzing a project with the following cash flows. Should this project be accepted based on the discounting approach to the modified internal rate of return if the discount rate is 14 percent? Why or why not?

year    Cash Flow

0           -236,000

1             137,400

2             189,300

3              -25,000

A. Yes; The MIRR is 13.48 percent.
B. Yes: The MIRR is 17.85 percent.
C. Yes; The MIRR is 21.23 percent.
D. No; The MIRR is 5.73 percent.
E. No; The MIRR is 17.85 percent.

Explanation / Answer

C. Yes: The MIRR is 17.85 percent.

Since the MIRR is 17.85 percent, the project should be accepted as the MIRR exceeds the required return

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