Question

In: Finance

Using Excel (if applicable), A company is considering a project that has the following cash flow...

Using Excel (if applicable),

A company is considering a project that has the following cash flow and WACC data. Note: CF0, CF2, and CF4 are negative Should the company take on this project if its WACC is 15? Justify your answer using NPV, IRR, and MIRR.

WACC:

15%

Year

0   

1

2

3

4

Cash flows

- $15,000

$25,000

- $2,000

$12,000

- $1,000

Solutions

Expert Solution

Using NPV rule, the project will be accepted as NPV >0.

As the cash flows are unconventional with three negative cash outflows, IRR rule will not be applicable here as IRR assumes the future cash flows reinvested as IRR and assumes conventional cash flows.

Using MIRR rule, as MIRR > Discount rate, the project will be accepted.

Formulae

Formulae as above

jeff jeffy answered 2 years ago
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