An investment proposition requires an initial cash expenditure of $2,000 and expected to generate a net cash flow of $20,000 at the end of one year. Due to income tax and mortgage financing factors, the venture is expected to yield a negative $10,000 when terminated at the end of the second year. Assume discount rate of 10 percent. What is MIRR? a) 36% b) 46.40% c) 18.5% d) 25% e) none of the above

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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An investment proposition requires an initial cash expenditure of $2,000 and
expected to generate a net cash flow of $20,000 at the end of one year. Due to
income tax and mortgage financing factors, the venture is expected to yield a
negative $10,000 when terminated at the end of the second year. Assume discount
rate of 10 percent. What is MIRR?
a) 36%
b) 46.40%
c) 18.5%
d) 25%
e) none of the above
Transcribed Image Text:An investment proposition requires an initial cash expenditure of $2,000 and expected to generate a net cash flow of $20,000 at the end of one year. Due to income tax and mortgage financing factors, the venture is expected to yield a negative $10,000 when terminated at the end of the second year. Assume discount rate of 10 percent. What is MIRR? a) 36% b) 46.40% c) 18.5% d) 25% e) none of the above
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