Capital Budgeting Assume you are evaluating two mutually exclusive projects, the cash flows of which appear below and that your company uses a cost of capital of 12% to evaluate projects such as these. Time Project A Cash Flows Project B Cash Flows 0 -$300,000 -$405,000 1 -387,000 134,000 2 -193,000 134,000 3 -100,000 134,000 4 600,000 134,000 5 600,000 134,000 6 850,000 134,000 7 -180,000 0 Calculate the IRR and MIRR of projects A & B. Assume a reinvestment rate of 12% for the calculation of MIRR.
Capital Budgeting Assume you are evaluating two mutually exclusive projects, the cash flows of which appear below and that your company uses a cost of capital of 12% to evaluate projects such as these. Time Project A Cash Flows Project B Cash Flows 0 -$300,000 -$405,000 1 -387,000 134,000 2 -193,000 134,000 3 -100,000 134,000 4 600,000 134,000 5 600,000 134,000 6 850,000 134,000 7 -180,000 0 Calculate the IRR and MIRR of projects A & B. Assume a reinvestment rate of 12% for the calculation of MIRR.
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
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Capital Budgeting
Assume you are evaluating two mutually exclusive projects, the cash flows of which appear below and that your company uses a cost of capital of 12% to evaluate projects such as these.
|
Time |
Project A Cash Flows |
Project B Cash Flows |
|
0 |
-$300,000 |
-$405,000 |
|
1 |
-387,000 |
134,000 |
|
2 |
-193,000 |
134,000 |
|
3 |
-100,000 |
134,000 |
|
4 |
600,000 |
134,000 |
|
5 |
600,000 |
134,000 |
|
6 |
850,000 |
134,000 |
|
7 |
-180,000 |
0 |
- Calculate the
IRR and MIRR of projects A & B. Assume a reinvestment rate of 12% for the calculation of MIRR.
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