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    Which project has the higher MIRR?

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    "Your company is considering two mutually exclusive projects, X and Y, whose costs and cash flows are shown below:

    Year X Y
    0 -$ 5,000 - $5,000
    1 1,000 4,500
    2 1,500 1,500
    3 2,000 1,000
    4 4,000 500

    The projects are equally risky, and their cost of capital is 12%. You must make a recommendation, and you must base it on the modified IRR (MIRR). Which project has the higher MIRR?"

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    Solution Summary

    See excel attached. MIRR typically gives a reinvestment rate that differences from cost of capital. Since it did not here, I used cost of capital for both.