Excel Applications for Accounting Principles
Excel Applications for Accounting Principles
4th Edition
ISBN: 9781111581565
Author: Gaylord N. Smith
Publisher: Cengage Learning
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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 |   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.
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Transcribed Image Text: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.
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