4. Which of the following statements is CORRECT? Assume that the project being c

Question

4. Which of the following statements is CORRECT? Assume that the project being considered has normal cash flows, with one cash outflow att- 0 followed by a series of positive cash flows A. A project's MIRR is always greater than its regular IRR. B. A project's MIRR is always less than its regular IRR. C. If a project's IRR is greater than its WACC, then its MIRR will be greater than the IRR. D. To find a project's MIRR, we compound cash inflows at the regular IRR and then find the discount rate that causes the PV of the terminal value to equal the initial cost. E. To find a project's MIRR, the textbook procedure compounds cash inflows at the WACC and then finds the discount rate that causes the PV of the terminal value to equal the initial cost. 5. Malholtra Inc. is considering a project that has the following cash flow and WACC data. What is the project's MIRR? Note that a project's projected MIRR can be less than the WACC (and even negative), in which case it will be rejected. WACC: 10.00% 0 $975 2 S320 4 S360 ear Cash flows A. 14.45% B. 12.92% C. 12.57% D. 11.28% E. 11.75% $300 $340

Explanation / Answer

4. The correct option is

B. A projects MIRR is less than Its regular IRR since this is the criteria which we follow while evaluating the consideration of the project and the MIRR van never exceed IRR of the project.

5. As in the given question wacc is 10% and by basing on the data provided theIRR will be OPTION " B" I.e,12.92%.

Related Questions

Navigate

• Browse (All)
• Browse 4
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.