Investment B: 0 -$1 million 1 $550,000 2 $400,000 3 $325,000 The timeline of an investment is shown above. If the cost of capital is 8%, a) What is the Net Present Value (NPV) of this investment? b) Calculate the Modified Internal Rate of Return (MIRR) of this investment

Investment B: 0 -$1 million 1 $550,000 2 $400,000 3 $325,000 The timeline of an investment is shown above. If the cost of capital is 8%, a) What is the Net Present Value (NPV) of this investment? b) Calculate the Modified Internal Rate of Return (MIRR) of this investment

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Definition Definition Calculation used to evaluate the investment and financing decisions that involve cash flows occurring over multiple periods. NPV is calculated as the difference between the present value of cash inflow and cash outflow. NPV is used for capital budgeting and investment planning as well as to compare similar investment alternatives.

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