MIRR unequal lives. Singing Fish Fine Foods has $1,940,000 for capital investments this year and is considering two potential projects for the funds. Project 1 is apdating the store's deli section for additional food service. The estimated after-tax cash flow of this project is $630,000 per year for the next five years. Project 2 is apdating the store's wine section. The estimated annual after-tax cash flow for this project is $520,000 for the next six years. The appropriate discount rate for the deli expansion is 9.7% and the appropriate discount rate for the wine section is 8.9%. What are the MIRRS for the Singing Fish Fine Foods projects? What are the MIRRS vhen you adjust for unequal lives? Do the MIRR adjusted for unequal lives change the decision based on MIRRS? Hint: Take all cash flows to the same ending period as the longest project. f the appropriate reinvestment rate for the deli expansion is 9.7%, what is the MIRR of the deli expansion? ]% (Round to two decimal places.) f the appropriate reinvestment rate for the wine section is 8.9%, what is the MIRR of the wine section? % (Round to two decimal places.) Based on the MIRR, Singing Fish Fine Foods should pick the project. (Select from the drop-down menu.) Vhat is the MIRR adjusted for unequal lives of the deli expansion? % (Round to two decimal places.) Vhat is the MIRR adjusted for unequal lives of the wine section? % (Round to two decimal places.) Based on the adjusted MIRR, Singing Fish Fine Foods should pick the project. (Select from the drop-down menu.) Does the decision change? (Select from the drop-down menu.) deli wine section nter your answer in each of the answer boxes.
MIRR unequal lives. Singing Fish Fine Foods has $1,940,000 for capital investments this year and is considering two potential projects for the funds. Project 1 is apdating the store's deli section for additional food service. The estimated after-tax cash flow of this project is $630,000 per year for the next five years. Project 2 is apdating the store's wine section. The estimated annual after-tax cash flow for this project is $520,000 for the next six years. The appropriate discount rate for the deli expansion is 9.7% and the appropriate discount rate for the wine section is 8.9%. What are the MIRRS for the Singing Fish Fine Foods projects? What are the MIRRS vhen you adjust for unequal lives? Do the MIRR adjusted for unequal lives change the decision based on MIRRS? Hint: Take all cash flows to the same ending period as the longest project. f the appropriate reinvestment rate for the deli expansion is 9.7%, what is the MIRR of the deli expansion? ]% (Round to two decimal places.) f the appropriate reinvestment rate for the wine section is 8.9%, what is the MIRR of the wine section? % (Round to two decimal places.) Based on the MIRR, Singing Fish Fine Foods should pick the project. (Select from the drop-down menu.) Vhat is the MIRR adjusted for unequal lives of the deli expansion? % (Round to two decimal places.) Vhat is the MIRR adjusted for unequal lives of the wine section? % (Round to two decimal places.) Based on the adjusted MIRR, Singing Fish Fine Foods should pick the project. (Select from the drop-down menu.) Does the decision change? (Select from the drop-down menu.) deli wine section nter your answer in each of the answer boxes.
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:**MIRR Unequal Lives Analysis**
**Context:**
Singing Fish Fine Foods has $1,940,000 for capital investments and is evaluating two potential projects:
1. **Project 1:** Update the store's deli section to offer additional food services.
- Estimated after-tax cash flow: $630,000 per year for 5 years.
- Appropriate discount rate: 9.7%.
2. **Project 2:** Update the store's wine section.
- Estimated after-tax cash flow: $520,000 per year for 6 years.
- Appropriate discount rate: 8.9%.
**Objective:**
Determine the MIRR (Modified Internal Rate of Return) for both projects and assess the impact on decision-making when adjusting for unequal project lives.
**Steps:**
1. **MIRR Calculation:**
- **Deli Expansion:**
- Given reinvestment rate: 9.7%.
- Calculate MIRR for unequal lives.
- **Wine Section:**
- Given reinvestment rate: 8.9%.
- Calculate MIRR for unequal lives.
2. **Decision Criteria:**
- Choose the project with the higher MIRR.
- Recalculate based on unequal project lives for a more accurate assessment.
- Re-evaluate decision based on adjusted MIRR.
**User Interaction:**
- Input fields for MIRR values.
- Dropdown menus for project selection based on MIRR and adjusted MIRR.
**Questions:**
- What is the MIRR for the deli expansion at a 9.7% reinvestment rate?
- What is the MIRR for the wine section at an 8.9% reinvestment rate?
- Based on the MIRR, which project should be chosen?
- What are the MIRRs adjusted for unequal lives for both projects?
- Based on adjusted MIRRs, which project should be chosen?
- Does the decision change?
**Instruction:**
Enter the calculated percentages and make selections using the dropdown menus.
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