$9.$ Cash flow patterns and the modified internal rate of return calculation

Henderson Manufacturing Inc. is analyzing a project with the following projected cash flows:

Year

Cash Flow

$0-$$$1,324,800$

$1300,000$

$2450,000$

$3546,000$

$4360,000$

This project exhibits $\_\_\_\_\_\_\_\_\_\_$ cash flows.

Henderson$$s desired rate of return is $8\mathrm{.}00\%.$ Given the cash flows expected from the company's new project, compute the project$$s anticipated modified internal rate of return $($MIRR$).($Hint: Round all dollar amounts to the nearest whole dollar, and your final MIRR value to two decimal places.$)$

$6\mathrm{.}99\%$

$7\mathrm{.}87\%$

$8\mathrm{.}74\%$

$9\mathrm{.}61\%$

Henderson$$s managers are generally conservative, and select projects based solely on the project$$s modified internal rate of return $($MIRR$).$ Should the company$$s managers accept this independent project?

No

Yes

You$$ve just learned that the analyst who assembled the project$$s projected cash flow information used incorrect data. You$$ve reexamined the source data and determined that the revised annual cash flow information should be:

Year

Cash Flow

$0-$$$998,750$

$1275,000$

$2-300,000$

$3360,000$

$4240,000$

Again, if Henderson$$s desired rate of return is $8\mathrm{.}00\%,$ then the project$$s revised modified internal rate of return $($MIRR$)$ should be $\_\_\_\_\_\_\_\_.($Hint: Round all dollar amounts to the nearest whole dollar, and your final MIRR value to two decimal places.$)$

If$,$ again, Henderson$$s managers continue to exhibit their general conservatism and select their investment projects based only on the project$$s MIRR, should they accept the project?

No

Yes