6.Calculate the project's Modified Internal Rate of Return (MIRR). What critical assumption does the MIRR make that differentiates it from the IRR?   TIP : look for the definition of Modified Internal Rate of Return, and then do it in excel, easy !!!   Year Net Cash flow Future Value of Net Cash flow 0 -$20.8 example 1 $4.5 $7.97   (n=6, i=10%) =fv(.1,6,,4.5) 2 $6.3  (n=5, i=10%) 3 $5.2    (n=4, i=10%) 4 $3.9   (n=3, i=10%)  5 $2.1   (n=2, i=10%) 6 $1.3    (n=1, i=10%) 7 $0.5    (n=0, i=10%)     Sum = $XX.XX     MIRR = ( in excel ) Rate ( 7,-20.8, xx.xx)   7.Where does the value of MIRR fall relative to the discount rate and IRR?

Complete the following 6 Wk 3 Financial Exercises: Problem Set 1, Part 2 problems: 1. Calculate the net present value (NPV) of the following cash flow stream if the required rate is 12%: Insert your NPV calculation. Year Cash Flow Is this a good project for the business to accept? Explain why or why not. Insert your answer. 2. Calculate the NPV of the following cash flow projections based on a required rate of 10.5%: Insert your NPV calculation. Year Cash Flow Is this a good project for the business to accept? Explain why or why not. Insert your answer. 3. A company needs to decide if it will move forward with 2 new products that it is evaluating. The 2 initiatives have the following cash flow projections: Project A Project B Year Cash Flow Year Cash Flow Based on the risk of each project, the company has a required rate of return of 11% for Project A and 11.5% for Project B. The company has a $1.5 million budget to spend on new projects for the year. Should the company move forward…

Consider the following two projects: Cash flows Project A Project B C0�0 −$ 240 −$ 240 C1�1 100 123 C2�2 100 123 C3�3 100 123 C4�4 100   a. If the opportunity cost of capital is 8%, which of these two projects would you accept (A, B, or both)? b. Suppose that you can choose only one of these two projects. Which would you choose? The discount rate is still 8%. c. Which one would you choose if the cost of capital is 16%? d. What is the payback period of each project? e. Is the project with the shortest payback period also the one with the highest NPV? f. What are the internal rates of return on the two projects? g. Does the IRR rule in this case give the same answer as NPV? h. If the opportunity cost of capital is 8%, what is the profitability index for each project? i. Is the project with the highest profitability index also the one with the highest NPV? j. Which measure should you use to choose between the projects?

5. LL Consider the following cash flows of a project: Year Year 1. 50 0. 2. 3. 4. 1. Find the internal rate of return for this investment. 0. 20. Multiple Choice < Prev 10 of 15 Next here to search F11 F12 F4 F5 69 81 9F-