OTR Trucking Company runs a fleet of​ long-haul trucks and has recently expanded into the​ Midwest, where it has decided to build a maintenance facility. This project will require an initial cash outlay of 20 million and will generate annual cash inflows of ​$ 4.5 million per year for Years 1 through 3. In Year​ 4, the project will provide a net negative cash flow of ​$5 million due to anticipated expansion of and repairs to the facility. During Years 5 through​ 10, the project will provide cash inflows of 2 million per year. a. Calculate the​ project's NPV and IRR where the discount rate is 12 percent. Is the project a worthwhile investment based on these two​ measures? Why or why​ not? b. Calculate the​ project's MIRR. Is the project a worthwhile investment based on this​ measure? Why or why​ not

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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OTR Trucking Company runs a fleet of​ long-haul trucks and has recently expanded into the​ Midwest, where it has decided to build a maintenance facility. This project will require an initial cash outlay of 20 million and will generate annual cash inflows of ​$ 4.5 million per year for Years 1 through 3. In Year​ 4, the project will provide a net negative cash flow of ​$5 million due to anticipated expansion of and repairs to the facility. During Years 5 through​ 10, the project will provide cash inflows of 2 million per year.


a. Calculate the​ project's NPV and IRR where the discount rate is 12 percent. Is the project a worthwhile investment based on these two​ measures? Why or why​ not?
b. Calculate the​ project's MIRR. Is the project a worthwhile investment based on this​ measure? Why or why​ not?

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