Question

QUESTION 13

1. Sylvania Inc. is considering a project that has the following cash flow and WACC data.
   

   WACC:	11.00%
   Year	0	1	2	3	4
   Cash flows	-$1,000	$400	$360	$360	$350

   
     
   What is the project's MIRR? Note that a project's projected MIRR can be less than the WACC (and even negative), in which case it will be rejected. Is this a good project to undertake or not? Explain.
   
     
   What is the project’s NPV? Is this a good project to undertake or not? Explain.
   
     
   What is the project’s IRR? Is this a good project to undertake or not? Explain.
   
     
   Did you reach to the same conclusion in each of the decision criteria above? Why or Why not?

Answer 1

As MIRR of the project > WACC, the project will be accepted.

As NPV>0, the project will be accepted

As IRR> WACC, the project will be accepted.

As in all three cases, the same conclusion is arrived at, the project will be accepted.

Formulae