Use the following information to answer the following question.
Below are the expected after-tax cash flows for Projects Y and Z.Both projects have an initial cash outlay of $20,000 and a required rate of return of 17%.
Project Y Project Z

-Mass Waste Disposal Inc.is considering the construction facility at a cost of $20 million.The project will produce positive cash flows of $7 million per year for the next four years but the fifth and final year will have a net negative cash flow of $5 million.If the discount rate is 10%, the MIRR of this project is [blank] and the project should be [blank].
A)8.16%; rejected
B)9.11%; accepted
C)7.40%; rejected
D)8.16%; accepted

Question

Use the following information to answer the following question.
Below are the expected after-tax cash flows for Projects Y and Z.Both projects have an initial cash outlay of $20,000 and a required rate of return of 17%.
Project Y Project Z
 
-Mass Waste Disposal Inc.is considering the construction facility at a cost of $20 million.The project will produce positive cash flows of $7 million per year for the next four years but the fifth and final year will have a net negative cash flow of $5 million.If the discount rate is 10%, the MIRR of this project is [blank] and the project should be [blank].
A)8.16%; rejected 
B)9.11%; accepted 
C)7.40%; rejected 
D)8.16%; accepted

Quizplus · Accepted Answer

The MIRR is calculated to be 8.16%, which is less than the discount rate of 10%, so the project should be rejected.

Use the Following Information to Answer the Following Question