You are given the following cash flows for Project A. The projectâs cost of capital is 12%. Year Cash Flow 0 -100 1 70 2 50 3 20 *What is Project Aâs Modified Internal Rate of Return (MIRR); (remember cost of capital is 12%)?
You are given the following cash flows for Project A. The projectâs cost of capital is 12%. Year Cash Flow 0 -100 1 70 2 50 3 20 *What is Project Aâs Modified Internal Rate of Return (MIRR); (remember cost of capital is 12%)?
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You are a financial analyst for the Brittle Company. The director of capital budgeting has asked you to analyze two proposed capital investments: Projects X and Y. Each project has a cost of $10,000, and the cost of capital for each is 12%. The projectsâ expected net cash flows are shown in the table below.
Expected Net Cash Flows
| Year | Project X | Project Y |
| 0 | â $10,000 | â $10,000 |
| 1 | 6,500 | 3,500 |
| 2 | 3,000 | 3,500 |
| 3 | 3,000 | 3,500 |
| 4 | 1,000 | 3,500 |
Use the Homework Student Workbook to calculate each projectâs net present value (NPV), internal rate of return (IRR), modified internal rate of return (MIRR), and profitability index (PI).
Which project or projects should be accepted if they are independent?
Which project or projects should be accepted if they are mutually exclusive?
You are a financial analyst for the Brittle Company. The director of capital budgeting has asked you to analyze two proposed capital investments: Projects X and Y. Each project has a cost of $10,000, and the cost of capital for each is 12%. The projectsâ expected net cash flows are shown in the table below.
Expected Net Cash Flows
| Year | Project X | Project Y |
| 0 | â $10,000 | â $10,000 |
| 1 | 6,500 | 3,500 |
| 2 | 3,000 | 3,500 |
| 3 | 3,000 | 3,500 |
| 4 | 1,000 | 3,500 |
Use the Homework Student Workbook to calculate each projectâs net present value (NPV), internal rate of return (IRR), modified internal rate of return (MIRR), and profitability index (PI).
Which project or projects should be accepted if they are independent?
Which project or projects should be accepted if they are mutually exclusive?
Axis Chemical Co. is analyzing a project that requires an initial investment of $2,225,000. The projectâs expected cash flows are:
| Year | Cash flow |
| Year 1 | $375,000 |
| Year 2 | -150,000 |
| Year 3 | 475,000 |
| Year 4 | 425,000 |
1. Axis Chemical Co.âs WACC is 7%, and the project has the same risk as the firmâs average project. Calculate this projectâs modified internal rate of return (MIRR):
a. 21.81%
b. 24.53%
c. -12.32%
d. 29.99%
2. If Axis Chemical Co.âs managers select projects based on the MIRR criterion, they should ___________this independent project.
a. reject
b. accept
3. Which oft the following statements about the relationship between IRR and the MIRR is correct?
a. A typical firmâs IRR will be greater than its MIRR.
b. A typical firmâs IRR will be equal to its MIRR.
c. A typical firmâs IRR will be less than its MIRR.
show how you got your answer. thanks
