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The 21st Century Corporation uses the modified internal rate of return. The firm has a
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The 21st Century Corporation uses the modified internal rate of return. The firm has a cost of capital of 8 percent. The project being analyzed is as follows ($20,000 investment):

Year

Cash Flow

1................

$10,000

2................

9,000

3................

6,800

         a.      What is the modified internal rate of return? An approximation from Appendix B is adequate. (You do not need to interpolate.)

            b.         Assume the traditional internal rate of return on the investment is 14.9 percent. Explain why your answer in part a would be lower.

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