Aviation Inc. is considering a new inventory system that will cost $375,000. The system is expected to generate $315,000 in year one, -$25,000 (negative) in year two, $110,000 in year three, and $150,000 in year four. Aviation's required rate of return is 10%. What is the MIRR (Modified Internal Rate of Return) of this project? a) 13.51%
b) 16.37%
c) 10.00%
d) 14.93%

d) 14.93%

Explanation:

initial outlay = -$375,000

cash flow year 1 = $315,000

cash flow year 2 = -$25,000

cash flow year 3 = $110,000

cash flow year 4 = $150,000

Since there are two cash outflows, we will have two different IRRs.

We can use an excel spreadsheet and the MIRR function to solve this:

=MIRR (-375000 to 150000, 10%, 10%) = 14.93%

unless told otherwise, we should use the discount rate as both our finance and reinvestment rate.

rational decision making is a multi-step process for making choices between alternatives. the process of rational decision making favors logic, objectivity, and analysis over subjectivity and insight. the word “rational” in this context does not mean sane or clear-headed as it does in the colloquial sense.

hope this

our agriculture industry and our business industry