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Corbett and Sullivan Enterprises (CSE)use the Modified Internal Rate of Return

question 83

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Corbett and Sullivan Enterprises (CSE) use the Modified Internal Rate of Return (MIRR) when evaluating projects.CSE's cost of capital is 9.5%.What is the MIRR of a project if the initial costs are $10,200,000 and the project lasts seven years,with each year producing the same after-tax cash inflows of $1,900,000?


Definitions:

Nonsystematic Variance

The portion of an investment's variance that is attributable to factors specific to its issuer and can be eliminated through diversification.

Market Index

A statistical measure reflecting the composite value of a selection of stocks, representing a specific market or a portion of it, used as a benchmark.

Active Portfolio

An investment portfolio that is managed with the intent to outperform the market through selecting and trading securities.

At-The-Money Call

An option contract with an exercise price that is approximately equal to the current price of the underlying asset.

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