CORPORATE FINANCE--CONNECT ACCESS CARD
12th Edition
ISBN: 9781264331062
Author: Ross
Publisher: MCG CUSTOM
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Chapter 5, Problem 20QAP
Summary Introduction
Adequate information:
| Year | Cash Flow |
| 0 | -$47,000 |
| 1 | $16,900 |
| 2 | $20,300 |
| 3 | $25,800 |
| 4 | $19,600 |
| 5 | -$9,500 |
Discount rate = 10%
To compute: The MIRR of the project under the discounting approach, reinvestment approach, and combined approach.
Introduction: MIRR is used to determine the attractiveness of an investment. MIRR allows for the adjustment of reinvestment rates pertaining to different stages of the project.
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Students have asked these similar questions
You are choosing between two projects. The cash flows for the projects are given in the following table ($ million):
a. What are the IRRs of the two projects?
b. If your discount rate is 4.7%, what are the NPVs of the two projects?
c. Why do IRR and NPV rank the two projects differently?
Data table
(Click on the following icon in order to copy its contents into a spreadsheet.)
Year 0
Project
A
Year 1
-
-$51
$27
B
- $101
$22
Year 2
$21
$42
Year 3
$20
Year 4
$13
$51
$59
-
☑
Duo Corporation is evaluating a project with the following cash flows. The company uses a discount rate of 12% and a reinvestment rate of 9% on all is projects. Calculate the MIRR of the project using all three methods with these interest rates.
You are choosing between two projects. The cash flows for the projects are given in the following table ($ million):
Year 2
Year 0
- $51
- $101
$21
$42
Project
A
B
Year 1
$25
$20
a. What are the IRRs of the two projects?
b. If your discount rate is 4.6%, what are the NPVs of the two projects?
c. Why do IRR and NPV rank the two projects differently?
%. (Round to one decimal place.)
a. What are the IRRs of the two projects?
The IRR for project A is
The IRR for project B is
%. (Round to one decimal place.)
b. If your discount rate is 4.6%, what are the NPVs of the two projects?
If your discount rate is 4.6%, the NPV for project A is $
C
Year 3
$21
$50
Year 4
$15
$59
million. (Round to two decimal places.)
million. (Round to two decimal places.)
If your discount rate is 4.6%, the NPV for project B is $
c. Why do IRR and NPV rank the two projects differently?
(Select from the drop-down menus.)
is measuring return on
NPV and IRR rank the two projects differently because they are measuring…
Chapter 5 Solutions
CORPORATE FINANCE--CONNECT ACCESS CARD
Ch. 5 - Payback Period and Net Present Value If a project...Ch. 5 - Net Present Value Suppose a project has...Ch. 5 - Comparing Investment Criteria Define each of the...Ch. 5 - Payback and Internal Rate of Return A project has...Ch. 5 - Prob. 5CQCh. 5 - Capital Budgeting Problems What are some of the...Ch. 5 - Prob. 7CQCh. 5 - Prob. 8CQCh. 5 - Net Present Value versus Profitability Index...Ch. 5 - Internal Rate of Return Projects A and B have the...
Ch. 5 - Net Present Value You are evaluating Project A and...Ch. 5 - Modified Internal Rate of Return One of the less...Ch. 5 - Net Present Value It is sometimes stated that the...Ch. 5 - Prob. 14CQCh. 5 - Prob. 1QAPCh. 5 - Prob. 2QAPCh. 5 - Prob. 3QAPCh. 5 - Prob. 4QAPCh. 5 - Prob. 5QAPCh. 5 - Prob. 6QAPCh. 5 - Prob. 7QAPCh. 5 - Prob. 8QAPCh. 5 - Prob. 9QAPCh. 5 - Prob. 10QAPCh. 5 - NPV versus IRR Consider the following cash flows...Ch. 5 - Prob. 12QAPCh. 5 - Prob. 13QAPCh. 5 - Prob. 14QAPCh. 5 - Prob. 15QAPCh. 5 - Comparing Investment Criteria Consider the...Ch. 5 - Prob. 17QAPCh. 5 - Comparing Investment Criteria Consider the...Ch. 5 - Prob. 19QAPCh. 5 - Prob. 20QAPCh. 5 - MIRR Suppose the company in the previous problem...Ch. 5 - Prob. 22QAPCh. 5 - Prob. 23QAPCh. 5 - Prob. 24QAPCh. 5 - Prob. 25QAPCh. 5 - Prob. 26QAPCh. 5 - Prob. 27QAPCh. 5 - Prob. 28QAPCh. 5 - Prob. 29QAPCh. 5 - Prob. 30QAPCh. 5 - Construct a spreadsheet to calculate the payback...Ch. 5 - Based on your analysis, should the company open...Ch. 5 - Prob. 3MC
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