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) What deficiencies in IRR can be overcome by using MIRR?

) What deficiencies in IRR can be overcome by using MIRR?

Essentials Of Investments
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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Excel Assessment A company is considering three mutually exclusive projects for its expansion plans. The initial investment in the project is OMR 400000. The finance director thinks that the project with the higher NPV should be chosen, whereas the managing director believes that the higher IRR should be undertaken, especially as projects have the same initial outlay and length of life. The company anticipates a cost of capital of 10.5%, and the net after-tax cash flows of the projects are as follows: Year Cash Flow A Cash Flow B Cash Flow C 70000 436000 90000 160000 20000 149000 180000 20000 51200 4 150000 8000 100000 5 40000 6000 49400 (All amounts are in OMR) Reauirad Eunlain near (c) What deficiencies in IRR can be overcome by using MIRR? 2.
Transcribed Image Text:Excel Assessment A company is considering three mutually exclusive projects for its expansion plans. The initial investment in the project is OMR 400000. The finance director thinks that the project with the higher NPV should be chosen, whereas the managing director believes that the higher IRR should be undertaken, especially as projects have the same initial outlay and length of life. The company anticipates a cost of capital of 10.5%, and the net after-tax cash flows of the projects are as follows: Year Cash Flow A Cash Flow B Cash Flow C 70000 436000 90000 160000 20000 149000 180000 20000 51200 4 150000 8000 100000 5 40000 6000 49400 (All amounts are in OMR) Reauirad Eunlain near (c) What deficiencies in IRR can be overcome by using MIRR? 2.
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