Question

The Caffeine Coffee Company uses the modified internal rate of return. The firm has a cost of capital of 11 percent. The project being analyzed is as follows ($26,000 investment):
Year Cash Flow
1 ....... $12,000
2 ....... 11,000
3 ....... 9,000
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 17.5 percent. Explain why your answer in part a would be lower.



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  • CreatedOctober 14, 2014
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