Cold Goose Metal Works Inc. is analyzing a project that requires an initial investment of $550,000. The project's expected cash flows are: Year Cash Flow Year 1 $325,000 Year 2 -175,000 Year 3 Year 4 450,000 475,000 Cold Goose Metal Works Inc.'s WACC is 7%, and the project has the same risk as the firm's average project. Calculate this project's modified intern rate of return (MIRR): 20.50% 17.83% 21.40% 16.94% If Cold Goose Metal Works Inc.'s managers select projects based on the MIRR criterion, they should accept this independent project. Which of the following statements best describes the difference between the IRR method and the MIRR method? The IRR method uses only cash inflows to calculate the IRR. The MIRR method uses both cash inflows and cash outflows to calculate the MIRR. -The IRR method uses the present value of the initial investment to calculate the IRR. The MIRR method uses the terminal value of the initial investment to calculate the MIRR.
Cold Goose Metal Works Inc. is analyzing a project that requires an initial investment of $550,000. The project's expected cash flows are: Year Cash Flow Year 1 $325,000 Year 2 -175,000 Year 3 Year 4 450,000 475,000 Cold Goose Metal Works Inc.'s WACC is 7%, and the project has the same risk as the firm's average project. Calculate this project's modified intern rate of return (MIRR): 20.50% 17.83% 21.40% 16.94% If Cold Goose Metal Works Inc.'s managers select projects based on the MIRR criterion, they should accept this independent project. Which of the following statements best describes the difference between the IRR method and the MIRR method? The IRR method uses only cash inflows to calculate the IRR. The MIRR method uses both cash inflows and cash outflows to calculate the MIRR. -The IRR method uses the present value of the initial investment to calculate the IRR. The MIRR method uses the terminal value of the initial investment to calculate the 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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Transcribed Image Text:Cold Goose Metal Works Inc. is analyzing a project that requires an initial investment of $550,000. The project's expected cash flows
are:
Year
Cash Flow
Year 1
$325,000
Year 2
-175,000
Year 3
Year 4
450,000
475,000
Cold Goose Metal Works Inc.'s WACC is 7%, and the project has the same risk as the firm's average project. Calculate this project's modified intern
rate of return (MIRR):
20.50%
17.83%
21.40%
16.94%
If Cold Goose Metal Works Inc.'s managers select projects based on the MIRR criterion, they should accept
this independent project.
Which of the following statements best describes the difference between the IRR method and the MIRR method?
The IRR method uses only cash inflows to calculate the IRR. The MIRR method uses both cash inflows and cash outflows to calculate the
MIRR.
-The IRR method uses the present value of the initial investment to calculate the IRR. The MIRR method uses the terminal value of the
initial investment to calculate the MIRR.
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