Cold Goose Metal Works Inc. is analyzing a project that requires an initial investment of $3,000,000. The project’s expected cash flows are: Year Cash Flow Year 1 $325,000 Year 2 –125,000 Year 3 425,000 Year 4 425,000 Cold Goose Metal Works Inc.’s WACC is 9%, and the project has the same risk as the firm’s average project. Calculate this project’s modified internal rate of return (MIRR): 17.95% -19.42% 20.78% 22.67% If Cold Goose Metal Works Inc.’s managers select projects based on the MIRR criterion, they should this independent project.
Cold Goose Metal Works Inc. is analyzing a project that requires an initial investment of $3,000,000. The project’s expected cash flows are: Year Cash Flow Year 1 $325,000 Year 2 –125,000 Year 3 425,000 Year 4 425,000 Cold Goose Metal Works Inc.’s WACC is 9%, and the project has the same risk as the firm’s average project. Calculate this project’s modified internal rate of return (MIRR): 17.95% -19.42% 20.78% 22.67% If Cold Goose Metal Works Inc.’s managers select projects based on the MIRR criterion, they should this independent project.
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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Cold Goose Metal Works Inc. is analyzing a project that requires an initial investment of $3,000,000. The project’s expected cash flows are:
|
Year
|
Cash Flow
|
|---|---|
| Year 1 | $325,000 |
| Year 2 | –125,000 |
| Year 3 | 425,000 |
| Year 4 | 425,000 |
Cold Goose Metal Works Inc.’s WACC is 9%, and the project has the same risk as the firm’s average project. Calculate this project’s modified internal rate of return (MIRR):
17.95%
-19.42%
20.78%
22.67%
If Cold Goose Metal Works Inc.’s managers select projects based on the MIRR criterion, they should this independent project.
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