Question

Singing Fish Fine Foods has ​$2,080,000 for capital investments this year and is considering two potential projects for the funds. Project 1 is updating the​ store's deli section for additional food service. The estimated​ after-tax cash flow of this project is ​$580,000 per year for the next five years. Project 2 is updating the​ store's wine section. The estimated annual​ after-tax cash flow for this project is ​$480,000 for the next six years. The appropriate discount rate for the deli expansion is 9.7​% and the appropriate discount rate for the wine section is 8.8​%. What are the MIRRs for the Singing Fish Fine Foods​ projects? What are the MIRRs when you adjust for unequal​ lives? Do the MIRR adjusted for unequal lives change the decision based on​ MIRRs? ​Hint: Take all cash flows to the same ending period as the longest project

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Answer 1

The Higher MIRR are preffered Therefor Project 1 Is preffered.

MIRR Adjusted for Unequal lives changes the decision based on MIRRs. Project 2 is preffered after Adjusted.