A project has projected cash flows of -$148,500, $32,800, $64,200, -$7,500 and $87,300 for years 0 to 4, respectively. Should this project be accepted based on the combination approach to the modified internal rate of return if both the discount rate and the reinvestment rate are 12.6 percent

The project should be rejected since the MIRR of 7.60% is less than the discount rate of 12.60%

Explanation:

Our first task here in order to reach the appropriate decision is to determine the modified internal rate of return using the formula provided below:

MIRR = (Future value of positive cash flows / present value of negative cash flows)^ (1/n) - 1

Note that a positive cash flow receivable in year 1 can be reinvested in years 2,3 and 4(for 3 years)

The positive cash flow receivable in year 2 can be reinvested in years 3 and 4(2 years)

Future value of positive cash flows=$32,800*(1+12.6%)^3+$64,200*(1+12.6%)^2+$87,300*(1+12.6%)^0

Future value of positive cash flows= $215,523.85  

present value of negative cash flows=$148,500+$17,500/(1+12.6%)^3

present value of negative cash flows=$160,758.09

n=4 years

MIRR=($215,523.85/$160,758.09)^(1/4)-1

MIRR=7.60%

the correct answer is:     [c]:     " cyclical unemployment " .

answer loneliness;