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? $$\begin{array} { c c }
\frac { \text { Year } } { 0 } & \frac { \text { Cash Flow } } { - \$ 236,000 } \
1 & 137,400 \
2 & 189,300 \
3 & - 25,000
\end{array}$$
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.

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? $$\begin{array} { c c } 
\frac { \text { Year } } { 0 } & \frac { \text { Cash Flow } } { - \$ 236,000 } \
1 & 137,400 \
2 & 189,300 \
3 & - 25,000
\end{array}$$
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.

Quizplus · Accepted Answer

The MIRR is calculated by discounting the negative cash flows and compounding the positive cash flows to the end of the project. With a discount rate of 14%, the MIRR is 17.85%, which is higher than the discount rate, indicating the project should be accepted.

Blue Water Systems Is Analyzing a Project with the Following