Which of the following projects is likely to have multiple Modified Internal Rates of Return. Assume a 14.5% cost of capital.
Project A -
Initial investment outlay: ($1,000,000)
t1: $0.00
t2: $0.00
t3: $0.00
t4: $0.00
t5: $0.00
t6: $10,000,000
Project B -
Initial investment outlay: ($1,000,000)
t1: $500,000
t2: $500,000
t3: $500,000
t4: $0.01
Project C -
Initial investment outlay: ($1,000,000)
t1: $800,000
t2: ($100,000)
t3: $550,000
Project D -
Initial investment outlay: ($500,000)
t1: $400,000
t2: ($1,000)
t3: $230,000
t4: ($50,000)
Click on the arrows to vote for the correct answer
A. B. C. D. E. F.C
Remember that the Modified Internal Rate of Return method will not produce multiple answers for nonnormal projects. The fact that MIRR will not produce multiple answers for non-normal projects is one of the reasons that this method should be considered as superior to the traditional Internal Rate of Return method.