Question
In: Finance
Your company is considering two mutually exclusive projects, X and Y, whose costs and cash flows are shown below:
Problem 10-11
MIRR and NPV
Your company is considering two mutually exclusive projects, X and Y, whose costs and cash flows are shown below:
| Year | X | Y | ||
| 0 | -$5,000 | -$5,000 | ||
| 1 | 1000 | 4,500 | ||
| 2 | 1500 | 1500 | ||
| 3 | 2000 | 1000 | ||
| 4 | 4000 | 500 | ||
The projects are equally risky, and their cost of capital is
15%. You must make a recommendation, and you must base it on the
modified IRR (MIRR). Calculate the two projects' MIRRs. Round your
answers to two decimal places.
Project X %
Project Y %
Which project has the higher MIRR?
-Select-XYItem 3
Solutions
jeff jeffy answered 2 years agoRelated Solutions
Your company is considering two mutually exclusive projects, X and Y, whose costs and cash flows...
Your company is considering two mutually exclusive projects, X
and Y, whose costs and cash flows are shown below:
Year
X
Y
0
−$2,000
−$2,000
1
200
2,000
2
600
200
3
800
100
4
2,400
75
The projects are equally risky, and the firm's required rate of
return is 12 percent. You must make a recommendation, and you must
base it on the modified IRR. What is the MIRR of the best
project?
a.
12.00%
b.
12.89%
c.
11.46%...
Mary Inc. is considering mutually exclusive Projects A and B, whose cash flows are shown below....
Mary Inc. is considering mutually exclusive Projects A and B,
whose cash flows are shown below. If the decision is made by
choosing the project with the higher IRR, will there be any value
loss due to the IRR-based decision? If there is a loss, how much
value will be forgone? The WACC is assumed to be 9.5%.
WACC:
Year
9.5%
0
1
2
3
4
CFA
−$2,020
$730
$730
$740
$740
CFB
−$4,100
$1,400
$1,500
$1,520
$1,530
Use a...
Big Inc. is considering Two Projects X and Y, whose cash flows are shown below. These...
Big Inc. is considering Two Projects X and Y, whose cash flows
are shown below. These projects are mutually exclusive, equally
risky, and not repeatable. The CEO believes the IRR is the best
selection criterion, while the CFO advocates other
methods.
WACC:
8.00%
Year
0
1
2
3
4
CFx
−$1,100
$450
$500
$100
$100
CFy
−$2,750
$625
$725
$800
$1,400
What are the MIRR’s? Discuss the importance of the MIRR method
over IRR.
If these projects are mutually exclusive...
Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below....
Suppose your firm is considering two mutually exclusive,
required projects with the cash flows shown below. The required
rate of return on projects of both of their risk class is 8
percent, and that the maximum allowable payback and discounted
payback statistic for the projects are 2 and 3 years, respectively.
Time: 0 1 2 3 Project A Cash Flow -25,000 15,000 35,000 6,000
Project B Cash Flow -35,000 15,000 25,000 55,000 Use the discounted
payback decision rule to evaluate...
Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below....
Suppose your firm is considering two mutually exclusive,
required projects with the cash flows shown below. The required
rate of return on projects of both of their risk class is 11
percent, and that the maximum allowable payback and discounted
payback statistic for the projects are 2 and 3 years,
respectively.
Time:
0
1
2
3
Project A Cash
Flow
-38,000
28,000
48,000
19,000
Project B Cash
Flow
-48,000
28,000
38,000
68,000
Use the discounted payback decision rule to evaluate...
Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below....
Suppose your firm is considering two mutually exclusive,
required projects with the cash flows shown below. The required
rate of return on projects of both of their risk class is 9
percent, and that the maximum allowable payback and discounted
payback statistic for the projects are 2 and 3 years, respectively.
Time: 0 1 2 3 Project A Cash Flow -21,000 11,000 31,000 2,000
Project B Cash Flow -31,000 11,000 21,000 51,000 Use the discounted
payback decision rule to evaluate...
Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below....
Suppose your firm is considering two mutually exclusive,
required projects with the cash flows shown below. The required
rate of return on projects of both of their risk class is 8
percent, and that the maximum allowable payback and discounted
payback statistic for the projects are 2 and 3 years, respectively.
Time: 0 1 2 3 Project A Cash Flow -20,000 10,000 30,000 1,000
Project B Cash Flow -30,000 10,000 20,000 50,000
Use the NPV decision rule to evaluate these...
Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below....
Suppose your firm is considering two mutually exclusive,
required projects with the cash flows shown below. The required
rate of return on projects of both of their risk class is 8
percent, and that the maximum allowable payback and discounted
payback statistic for the projects are 2 and 3 years,
respectively.
time
0
1
2
3
project A cash flow
-25,000
15,000
35,000
6,000
project B cash flow
-35,000
15,000
25,000
55,000
Time: 0 1 2 3 Project A Cash...
Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below....
Suppose your firm is considering two mutually exclusive,
required projects with the cash flows shown below. The required
rate of return on projects of both of their risk class is 10
percent, and that the maximum allowable payback and discounted
payback statistic for the projects are 2 and 3 years,
respectively.
Time:
0
1
2
3
Project A Cash Flow
-27,000
17,000
37,000
8,000
Project B Cash Flow
-37,000
17,000
27,000
57,000
Use the PI decision rule to evaluate these...
Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below....
Suppose your firm is considering two mutually exclusive,
required projects with the cash flows shown below. The required
rate of return on projects of both of their risk class is 12
percent, and that the maximum allowable payback and discounted
payback statistic for the projects are 2 and 3 years,
respectively.
Time: 0 1 2 3
Project A Cash Flow -39,000 29,000 49,000 20,000
Project B Cash Flow -49,000 29,000 39,000 69,000
Use the PI decision rule to evaluate these...
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