In capital budgeting practices, investment project evaluations based on the net present value (NPV) and the internal rate of return (IRR) represent the traditional evaluation techniques. Compared with the traditional methods, the modified internal rate of return (MIRR) gives the opportunity to evaluate an investment in certain projet, while taking the changes in cash flows over time and issuing shares such as dividing shares, bonuses, and dividend for each end of the investment year into account. Therefore, this study aims to evaluate an investment in the Malaysian construction sector utilizing financial data for 39 public listed companies operating in the Malaysian construction sector over the period from Jan 1, 2007, to December 30, 2018, based on the MIRR method. Stochastic was studied in this study to estimate the estimated probability by applying the Markov chain model to the MIRR method where the transition matrix has two possible movements of either Good (G) or Bad (B). it is found that the long-run probability of getting a good investment is higher than the probability of getting a bad investment in the long-run, where were the probabilities of good and bad are 0.5119, 0.4881, respectively. Hence, investment in the Malaysian construction sector is recommended.

Abstract
1. Introduction and Background
2. Methodology
    2.1. Markov Chain Model
    2.2. Transition Matrix and Transition ProbabilityMatrix
    2.3. Limiting Distributions “StationaryDistribution of a Markov Chain”
    2.4. Expected Number of Visits
    2.5. Expected Return Time
    2.6. Investment Strategy
    2.7. Define MIRR
3. Data Source
4. Results and Discussion
    4.1. Derivation of the Two-State TransitionProbability Matrix
    4.2. Determination of Initial State Vector
    4.3. Computation of State Probabilities forForecasting the MIRR
    4.4. Decision Making under Long-Run Behavior ofMIRR
    4.5. Determination of Expected Numbers of Visits
    4.6. Determination of Expected Return Time
5. Conclusion
References

• Wajeeh Mustafa SARSOUR(School of Mathematical Sciences, Universiti Sains Malaysia) Corresponding Author
• Shamsul Rijal Muhammad SABRI(School of Mathematical Sciences, Universiti Sains Malaysia)