Chapter 9, Problem 28QP

Summary Introduction

To calculate: The NPV (Net present value) and IRR (Internal rate of return) for the reinvestment project and identify whether the computed IRR is the MIRR (Modified internal rate of return) of the project with a reason.

Introduction:

The internal rate of return is a rate of discount, which makes the predictable investment’s NPV equal to zero. The net present value is one of the capital budgeting techniques, which is used to identify the profitability in the proposed investment.

Answer:

The NPV for the reinvested project is -$95,069.01 and IRR is 8.73%. As the IRR calculation might look like MIRR computation, but they are different. It is a calculation of the standard IRR.