Harley worked for many years to save enough money to start his own residential landscape design business. The net cash flows shown are those he recorded for the first 6 years as his own boss. Find the external rate of return using the modified rate of return approach with a reinvestment rate of 15% per year and a borrowing rate of 8%. Additionally, after using the procedure, use the MIRR function to confirm your answer.| Year | 0 | 1 | 2 | 3 | 4 | 5 | 6 ||------|-------|-------|-------|-------|-------|-------|-------|| NCF, $ | -9,000 | 4,100 | -4,000 | -7,000 | 12,000 | 700 | 1,050 |- The external rate of return is \_\_\_\_ % per year.- The spreadsheet function is `=RATE(6,-17986,,25972)`.The table consists of two rows:1. **Year**: Represents each year from 0 to 6.2. **NCF, $**: Lists the net cash flow for each corresponding year.The process involves using the given reinvestment and borrowing rates to calculate the external rate of return, which can then be confirmed using the MIRR (Modified Internal Rate of Return) function in spreadsheet software.

The modified internal rate of return (MIRR) is based on the assumption that any positive cash flows are reinvested at the same cost of capital as the company, and that any new outlays are funded at the same cost as the company.

Business

Accounting

Harley worked for many years to save enough money to start his own residential landscape design business. The net cash flows shown are those he recorded for the first 6 years as his own boss. Find the external rate of return using the modified rate of return approach with a reinvestment rate of 15% per year and a borrowing rate of 8%. Additionally, after using the procedure, use the MIRR function to confirm your answer. Year NCF, $ 0 1 -9,000 4,100 The external rate of return is The spreadsheet function is 2 -4,000 3 -7,000 % per year. =RATE(6,-17986,,25972) ► 4 5 12,000 700 6 1,050

Harley worked for many years to save enough money to start his own residential landscape design business. The net cash flows shown are those he recorded for the first 6 years as his own boss. Find the external rate of return using the modified rate of return approach with a reinvestment rate of 15% per year and a borrowing rate of 8%. Additionally, after using the procedure, use the MIRR function to confirm your answer. Year NCF, $ 0 1 -9,000 4,100 The external rate of return is The spreadsheet function is 2 -4,000 3 -7,000 % per year. =RATE(6,-17986,,25972) ► 4 5 12,000 700 6 1,050

Excel Applications for Accounting Principles

4th Edition

ISBN:9781111581565

Author:Gaylord N. Smith

Publisher:Gaylord N. Smith

ChapterMB: Model-building Problems

Section: Chapter Questions

Problem 15M

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Harley worked for many years to save enough money to start his own residential landscape design business. The net cash flows shown are those he recorded for the first 6 years as his own boss. Find the external rate of return using the modified rate of return approach with a reinvestment rate of 15% per year and a borrowing rate of 8%. Additionally, after using the procedure, use the MIRR function to confirm your answer. Year 10 NCF, $ -9,000 4,100 The external rate of return is 2 -4,300 % per year. 5 -7,000 12,000 700 Saved The spreadsheet function is (Click to select) (Click to select) =RATE(6, 26122,-18243) =RATE(6,26122,,-18243) =RATE(6,-18243,26122) =RATE(6,-18243, 26122) 6 1,200
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