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Alyeska Salmon Inc., a large salmon canning firm operating out of Valdez, Alaska, has a new automated production line project it is considering. The project has a cost of $275,000 and is expected to provide after-tax annual cash flows of $73,306 for eight years. The firm's management is uncomfortable with the IRR reinvestment assumption and prefers the modified IRR approach. You have calculated a cost of capital for the firm of 12 percent. What is the project's MIRR?
A. 12.0%
B. 15.0%
C. 14.0%
D. 17.0%
E. 16.0%
Answer: E
Explanation:
Explanation/Reference:
Explanation:
TV = $73,306(FVIFA(12%,8)) = $73,306(12.300) = $901,663.80.
$275,000 = $901,663.80 / (1 + MIRR)

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Answer: A

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