A company is considering a project that has the following cash flow with a WACC (Weighted Average Cost of Capital) of 12.50%. What is the project’s MIRR (Modified Internal Rate of Return)? Note that a project’s projected MIRR can be less than the WACC (and even negative), in which case it will be rejected.### Cash Flow Table| Year | 0 | 1 | 2 | 3 | 4 ||------|------|-----|-----|-----|-----|| Cash flows | -$850 | $300 | $320 | $340 | $360 |**Explanation of Terms:**- **WACC (Weighted Average Cost of Capital):** The average rate of return a company is expected to pay to its security holders to finance its assets.- **MIRR (Modified Internal Rate of Return):** A financial measure that adjusts the IRR to overcome some of its limitations by incorporating the cost of capital and risk of the investment.In the table, the cash flows are listed for each year (0 to 4). The initial investment (Year 0) is -$850, which indicates a cash outflow. The subsequent years (1 to 4) have positive cash flows of $300, $320, $340, and $360, respectively.

The MIRR can be calculated as compounded annual rate of future value of cash inflows and the initial…

A company is considering a project that has the following cash flow with a WACC of 12.50%. What is the project's MIRR? Note that a project's projected MIRR can be less than the WACC (and even negative), in which case it will be rejected. Year 0 1 2 3 4 Cash flows -$850 $300 $320 $340 $360

A company is considering a project that has the following cash flow with a WACC of 12.50%. What is the project's MIRR? Note that a project's projected MIRR can be less than the WACC (and even negative), in which case it will be rejected. Year 0 1 2 3 4 Cash flows -$850 $300 $320 $340 $360

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

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

For the given cash flows, suppose the firm uses the NPV decision rule. Year Cash Flow 0-$ 150,000 1 66, 000 2 73,000 3 57,000 a. At a required return of 10 percent, what is the NPV of the project? b. At a required return of 20 percent, what is the NPV of the project?
Union pacific is considering a project that has the following cash flow and WACC data. What is the projects MIRR? Note that a projects MIRR can be less than the WACC (and negative), in which case be rejected. WACC: 9.50% Year 0 1 2 3 Cash flows -1,000, 450, 450, 450
Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 8 percent, and that the maximum allowable payback and discounted payback statistics for the project are 3.5 and 4.5 years, respectively. Time: Cash flow: 0 4 -$5,000 $1,200 $2,400 $1,600 $1,600 $1,400 Use the IRR decision rule to evaluate this project. (Do not round intermediate calculations and round your final onswer to 2 decimal places.) Answer is complete but not entirely correct. IRR 6 $1,200 14.00 %
Consider the following projects: Year 0 Year 1 Year 2 Year 3 Year 4 Discount Rate Cash Flow A -100 30 20 40 B -73 25 20 20 C -27 10 9 9 13= 60 14.50% 45 15.00% 11 14.00% a. Find the NPV of the projects, will you accept/reject them? b. What is the IRR of the projects, will you accept/reject? c. If the firm had $250 to invest today, what project(s) should it pursue? d. If the firm only had $100 to invest today, what project(s) should it pursue?
Warr Company is considering a project that has the following cash flow data. What is the project's IRR? Note that a project's projected IRR can be less than the WACC or negative, in both cases it will be rejected. Year 1 4 Cash flows -$1540 $400 $400 $400 $400 O a. 4.13% O b. 0.99% O c. 1.22% O d. 1.547% O e. 3.58%
Kiley Electronics is considering a project that has the following cash flow data. What is the project's IRR? Note that a project's IRR can be less than the cost of capital (and even negative), in which case it will be rejected. r: 10.00% Year 0 1 2 3 Cash flows −$1,000 $550 $560 $570
Q4 Two new projects are proposed to a company. The Project A will cost $200,000 to develop and is expected to have annual cash flow of $90.000. The Project B will cost $ 250,000 to develop and is expected to have annual cash flow of $100,000. The company is very concerned about their cash flow. Using the NPV and Payback period, which project is better from a cashflow standpoint? r=10y.
A firm evaluates all of its projects by applying the NPV decision rule. A project under consideration has the following cash flows: Year 0 1 2 3 NPV Cash Flow -$ 28,600 12,600 What is the NPV for the project if the required return is 11 percent? (Do not round Intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV At a required return of 11 percent, should the firm accept this project? O No 15,600 11,600 Yes What is the NPV for the project if the required return is 25 percent? (A negative answer should be Indicated by a minus sign. Do not round Intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) At a required return of 25 percent, should the firm accept this project? O Yes O NO
3.) XYZ Computer Systems is considering a project that has the following cash flow data. What is the project's IRR? Note that a project's projected IRR can be less than the WACC (and even negative), in which case it will be rejected. (Answer should be in excel format and show spreadsheet inputs) Year 0 1 2 3 Cash flows ($1,100) $400 $470 $490
Zuni Computer Systems is considering a project with the following cash flow data. What is the project's IRR? Note that a project's projected IRR can be less than the WACC (and even negative), in which case it will be rejected. Year 6.67% Cash flows -$1,250 $450 $470 $490 5.99% 5.01% 5.50% 0 6.18% 1 2 3
Ehrmann Data Systems is considering a project that has the following cash flow and WACC data. What is the project's MIRR? Note that a project's projected MIRR can be less than the WACC (and even negative), in which case it will be rejected. Training WACC: 12.00% Year 0 1 2 3 Cash flows - $1,000 $540 $540 $540
A firm has a project with the following cash flows: Year Cash Flow 0 $30,000 1 -6,000 2 -9,000 3 48,000 The required rate of return is 6%. Which of the following statement on decision rules is incorrect? A. IRR decision rule can be safely used to evaluate the project. B. NPV decision rule can be safely used to evaluate the project. C. Modified IRR decision rule can be safely used to evaluate the project. D. Profitability index decision rule can be safely used to evaluate the project.

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS