A firm is considering two mutually exclusive projects X and

A firm is considering two mutually exclusive projects, X and Y, with the following cash flows: Project X-$1,000 $90 $300 $370 $700 Project Y $1,000 $1,100 $100 $55 The projects are equally risky, and their WACC is 11%. what is the MIRR of the project that maximizes shareholder value? Round your answer to two decimal places. Do not round your intermediate calculations.

Solution

Project X:

NPV = 56.22

MIRR = 12.53% (Use MIRR funciton in Excel)

Project Y:

NPV = 145.31

MIRR = 14.83%

ans: 14.83% since Y adds more value

Discount rate	11.0000%
Cash flows	Year	Discounted CF= cash flows/(1+rate)^year	Cumulative cash flow
(1,000.00)	0	(1,000.00)	(1,000.00)
90.000	1	81.08	(918.92)
300.000	2	243.49	(675.43)
370.000	3	270.54	(404.89)
700.000	4	461.11	56.22