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Modified Internal Rate of Return

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The 21st century corporation uses the modified internal rate of return. The firm has a cost of capital of 8 percent. The project being analyzed is as follows ($20,000 investment):

Year Cash Flow
1 $10,000
2 $9,000
3 $6,800

a. What is the modified internal rate of return?
b. Assume the traditional internal rate of return on the investment is 14.9 percent. Explain why your answer to part a would be lower.

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Solution Summary

The solution examines modified internal rates of return. The traditional internal rate of return on the investment is determined.

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