Corporate Finance
12th Edition
ISBN: 9781259918940
Author: Ross, Stephen A.
Publisher: Mcgraw-hill Education,
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Question
Chapter 5, Problem 20QAP
Summary Introduction
Adequate information:
| Year | Cash Flow |
| 0 | -$47,000 |
| 1 | $16,900 |
| 2 | $20,300 |
| 3 | $25,800 |
| 4 | $19,600 |
| 5 | -$9,500 |
Discount rate = 10%
To compute: The MIRR of the project under the discounting approach, reinvestment approach, and combined approach.
Introduction: MIRR is used to determine the attractiveness of an investment. MIRR allows for the adjustment of reinvestment rates pertaining to different stages of the project.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
You are choosing between two projects. The cash flows for the projects are given in the following table ($ million):
a. What are the IRRs of the two projects?
b. If your discount rate is 4.7%, what are the NPVs of the two projects?
c. Why do IRR and NPV rank the two projects differently?
Data table
(Click on the following icon in order to copy its contents into a spreadsheet.)
Year 0
Project
A
Year 1
-
-$51
$27
B
- $101
$22
Year 2
$21
$42
Year 3
$20
Year 4
$13
$51
$59
-
☑
An Organization invests BDT. 10,00,000 for a project and the discount rate is 12%. After analyzing the NPV and BCR value for the giventable, make a decision. (Draw the cash flow diagram)
Duo Corporation is evaluating a project with the following cash flows. The company uses a discount rate of 12% and a reinvestment rate of 9% on all is projects. Calculate the MIRR of the project using all three methods with these interest rates.
Chapter 5 Solutions
Corporate Finance
Ch. 5 - Payback Period and Net Present Value If a project...Ch. 5 - Net Present Value Suppose a project has...Ch. 5 - Comparing Investment Criteria Define each of the...Ch. 5 - Payback and Internal Rate of Return A project has...Ch. 5 - Prob. 5CQCh. 5 - Capital Budgeting Problems What are some of the...Ch. 5 - Prob. 7CQCh. 5 - Prob. 8CQCh. 5 - Net Present Value versus Profitability Index...Ch. 5 - Internal Rate of Return Projects A and B have the...
Ch. 5 - Net Present Value You are evaluating Project A and...Ch. 5 - Modified Internal Rate of Return One of the less...Ch. 5 - Net Present Value It is sometimes stated that the...Ch. 5 - Prob. 14CQCh. 5 - Prob. 1QAPCh. 5 - Prob. 2QAPCh. 5 - Prob. 3QAPCh. 5 - Prob. 4QAPCh. 5 - Prob. 5QAPCh. 5 - Prob. 6QAPCh. 5 - Prob. 7QAPCh. 5 - Prob. 8QAPCh. 5 - Prob. 9QAPCh. 5 - Prob. 10QAPCh. 5 - NPV versus IRR Consider the following cash flows...Ch. 5 - Prob. 12QAPCh. 5 - Prob. 13QAPCh. 5 - Prob. 14QAPCh. 5 - Prob. 15QAPCh. 5 - Comparing Investment Criteria Consider the...Ch. 5 - Prob. 17QAPCh. 5 - Comparing Investment Criteria Consider the...Ch. 5 - Prob. 19QAPCh. 5 - Prob. 20QAPCh. 5 - MIRR Suppose the company in the previous problem...Ch. 5 - Prob. 22QAPCh. 5 - Prob. 23QAPCh. 5 - Prob. 24QAPCh. 5 - Prob. 25QAPCh. 5 - Prob. 26QAPCh. 5 - Prob. 27QAPCh. 5 - Prob. 28QAPCh. 5 - Prob. 29QAPCh. 5 - Prob. 30QAPCh. 5 - Construct a spreadsheet to calculate the payback...Ch. 5 - Based on your analysis, should the company open...Ch. 5 - Prob. 3MC
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment of $35,000 and is expected to generate the following cash flows: Use the information from the previous exercise to calculate the internal rate of return on both projects and make a recommendation on which one to accept. For further instructions on internal rate of return in Excel, see Appendix C.arrow_forwardThere are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment of $35,000 and is expected to generate the following cash flows: If the discount rate is 12%, compute the NPV of each project.arrow_forwardYou are choosing between two projects. The cash flows for the projects are given in the following table ($ million): Year 2 Year 0 - $51 - $101 $21 $42 Project A B Year 1 $25 $20 a. What are the IRRs of the two projects? b. If your discount rate is 4.6%, what are the NPVs of the two projects? c. Why do IRR and NPV rank the two projects differently? %. (Round to one decimal place.) a. What are the IRRs of the two projects? The IRR for project A is The IRR for project B is %. (Round to one decimal place.) b. If your discount rate is 4.6%, what are the NPVs of the two projects? If your discount rate is 4.6%, the NPV for project A is $ C Year 3 $21 $50 Year 4 $15 $59 million. (Round to two decimal places.) million. (Round to two decimal places.) If your discount rate is 4.6%, the NPV for project B is $ c. Why do IRR and NPV rank the two projects differently? (Select from the drop-down menus.) is measuring return on NPV and IRR rank the two projects differently because they are measuring…arrow_forward
- A project has the following cash flows set out below. What is the profitability index of this project if the relevant discount rate is 2 percent? Enter your final answer to two decimal places. Year Cash flow 0 -1,745 1 537 2 2,066 3 3,912arrow_forwardThere are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment or $28,000 and is expected to generate the following cash flows: Q: If the discount rate is 5% compute the NPV of each project and make a recommendation of the project to be chosen.arrow_forwardYou are choosing between two projects. The cash flows for the projects are given in the following table ($ million): Project Year 0 Year 1 Year 2 Year 3 Year 4 A −$51 $25 $19 $19 $17 B −$98 $19 $40 $51 $60 a. What are the IRRs of the two projects? b. If your discount rate is 4.8%, what are the NPVs of the two projects? c. Why do IRR and NPV rank the two projects differently?arrow_forward
- Your company has a project available with the following cash flows : If the required return is 14 percent should the project be accepted based on IRR?arrow_forwardA small company wants to invest in Project A or B. The cash flows for both are shown below. Determine the payback period for each project assuming a MARR of 5% and suggest which project should be selected based on discounted payback period analysis.arrow_forwardYou are choosing between two projects. The cash flows for the projects are given in the following table ( $ million ) : What are the IRRs of the two projects? If your discount rate is 5.4 % , what are the NPVs of the two projects? Why do IRR and NPV rank the two projects differently?arrow_forward
- Solo Corp. is evaluating a project with the following cash flows: Year Cash Flow 0 29,500 1 11,700 2 14,400 3 16,300 4 13,400 5 9,900 The company uses a discount rate of 13 percent and a reinvestment rate of 6 percent on all of its projects. a. Calculate the MIRR of the project using the discounting approach. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b.Calculate the MIRR of the project using the reinvestment approach. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c. Calculate the MIRR of the project using the combination approach. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Discounting approach MIRR b. Reinvestment approach MIRR C. Combination approach MIRR % % %arrow_forwardYou are choosing between two projects. The cash flows for the projects are given in the following table ($ million): a. What are the IRRs of the two projects? b. If your discount rate is 4.6%, what are the NPVS of the two projects? c. Why do IRR and NPV rank the two projects differently? a. What are the IRRS of the two projects? The IRR for project A is%. (Round to one decimal place.) Data table CHE (Click on the following icon in order to copy its contents into a spreadsheet.) Project Year 0 Year 1 Year 2 A -$48 $25 $21 B - $98 $20 $39 Print Done Year 3 $19 $52 Year 4 $14 $62 -arrow_forwardYou are choosing between two projects. The cash flows for the projects are given in the following table ($ million): - a. What are the IRRs of the two projects? b. If your discount rate is 5.1%, what are the NPVs of the two projects? c. Why do IRR and NPV rank the two projects differently? a. What are the IRRs of the two projects? The IRR for project A is%. (Round to one decimal place.) Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Project Year 0 Year 1 Year 2 A - $49 $23 $19 B - $101 $19 $40 Print Done Year 3 $18 $49 Year 4 $14 $62 Xarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Capital Budgeting Introduction & Calculations Step-by-Step -PV, FV, NPV, IRR, Payback, Simple R of R; Author: Accounting Step by Step;https://www.youtube.com/watch?v=hyBw-NnAkHY;License: Standard Youtube License