8. Modified internal rate of return (MIRR)
The IRR evaluation method assumes that cash flows from...
8. Modified internal rate of return (MIRR)
The IRR evaluation method assumes that cash flows from the
project are reinvested at the same rate equal to the IRR. However,
in reality the reinvested cash flows may not necessarily generate a
return equal to the IRR. Thus, the modified IRR approach makes a
more reasonable assumption other than the project's IRR.
Consider the following situation :
Cute Camel Woodcraft Company is analyzing a project that
requires an initial investment of $3,225,000....
Modified internal rate of return (MIRR)
The IRR evaluation method assumes that cash flows from the...
Modified internal rate of return (MIRR)
The IRR evaluation method assumes that cash flows from the
project are reinvested at the same rate equal to the IRR. However,
in reality the reinvested cash flows may not necessarily generate a
return equal to the IRR. Thus, the modified IRR approach makes a
more reasonable assumption other than the project’s IRR.
Consider the following situation:
Fuzzy Button Clothing Company is analyzing a project that
requires an initial investment of $500,000. The project’s...
The IRR evaluation method assumes that cash flows from the
project are reinvested at the same...
The IRR evaluation method assumes that cash flows from the
project are reinvested at the same rate equal to the IRR. However,
in reality the reinvested cash flows may not necessarily generate a
return equal to the IRR. Thus, the modified IRR approach makes a
more reasonable assumption other than the project’s IRR.
Consider the following situation:
Blue Llama Mining Company is analyzing a project that requires
an initial investment of $450,000. The project’s expected cash
flows are:
Year
Cash...
Grey company is analyzing a project that requires an initial
investment of $600,000. The project's expected...
Grey company is analyzing a project that requires an initial
investment of $600,000. The project's expected cash flows are:
(Year 1) $350,000, (Year 2) -$125,000, (Year 3) $500,000 and (Year
4) $400,000.
1. Grey company's WACC is 10%, and the project has the same risk
as the firm's average project. Calculate this project's modified
internal rate of return (MIRR): _______%.
2. If Grey company's managers select projects based on the MIRR
criterion, they should accept or reject this
independent project....
4. Modified internal rate of return (MIRR)
The IRR evaluation method assumes that cash flows from...
4. Modified internal rate of return (MIRR)
The IRR evaluation method assumes that cash flows from the
project are reinvested at the same rate equal to the IRR. However,
in reality the reinvested cash flows may not necessarily generate a
return equal to the IRR. Thus, the modified IRR approach makes a
more reasonable assumption other than the project’s IRR.
Consider the following situation:
Cold Goose Metal Works Inc. is analyzing a project that requires
an initial investment of $500,000....
The IRR evaluation method assumes that cash flows from the
project are reinvested at the same...
The IRR evaluation method assumes that cash flows from the
project are reinvested at the same rate equal to the IRR. However,
in reality the reinvested cash flows may not necessarily generate a
return equal to the IRR. Thus, the modified IRR approach makes a
more reasonable assumption other than the project’s IRR.
Consider the following situation:
Green Caterpillar Garden Supplies Inc. is analyzing a project
that requires an initial investment of $400,000. The project’s
expected cash flows are:
Year...
The IRR evaluation method assumes that cash flows from the
project are reinvested at a rate...
The IRR evaluation method assumes that cash flows from the
project are reinvested at a rate equal to the project’s IRR.
However, in reality, the reinvested cash flows may not necessarily
generate a return equal to the IRR. Thus, using the modified IRR
approach, you can make a more reasonable estimate of a project’s
rate of return than the project’s IRR can.
Consider the following situation:
Cold Goose Metal Works Inc. is analyzing a project that requires
an initial investment...
The net present value (NPV) method estimates how much a
potential project will contribute to ____...
The net present value (NPV) method estimates how much a
potential project will contribute to ____ and it
is the best selection criterion. The _____ the
NPV, the more value the project adds; and added value means a ____
stock price.
CFt is the expected cash flow at Time t, r is the
project's risk-adjusted cost of capital, and N is its life, and
cash outflows are treated as negative cash flows. The NPV
calculation assumes that cash inflows can...
Capital Budgeting Decision Criteria: NPV
NPV
The net present value (NPV) method estimates how much a...
Capital Budgeting Decision Criteria: NPV
NPV
The net present value (NPV) method estimates how much a
potential project will contribute to -Select-business
ethicsshareholders' wealthemployee benefitsCorrect 1 of Item 1, and
it is the best selection criterion. The
-Select-smallerlargerCorrect 2 of Item 1 the NPV, the more value
the project adds; and added value means a
-Select-higherlowerCorrect 3 of Item 1 stock price. In equation
form, the NPV is defined as:
CFt is the expected cash flow in Period t, r...
A thumbs up will be given:
Table 1
t
A
B
C
D
0
(14,900,000)...
A thumbs up will be given:
Table 1
t
A
B
C
D
0
(14,900,000)
(17,900,000)
(16,600,000)
(19,700,000)
1
4,980,000
5,990,000
3,850,000
6,400,000
2
4,980,000
6,210,000
4,990,000
5,880,000
3
4,510,000
6,250,000
6,860,000
6,800,000
4
4,510,000
4,700,000
4,990,000
6,650,000
Risk
High
Average
Low
Average
Table 1 shows the expected after-tax operating cash flows for
each project. All projects are expected to...