Question
In: Finance
Management of Wildhorse Home Furnishings is considering acquiring a new machine that can create customized window...
Management of Wildhorse Home Furnishings is considering acquiring a new machine that can create customized window treatments. The equipment will cost $226,550 and will generate cash flows of $64,750 over each of the next six years. If the cost of capital is 12 percent, what is the MIRR on this project? (Round intermediate calculations to 3 decimals and final answers to 1 decimal places, e.g. 15.5%. Do not round factor values.)
Solutions
Expert Solution
| Year | Cash flow | ||||||||
| 0 | $ -2,26,550 | ||||||||
| 1 | $ 64,750 | ||||||||
| 2 | $ 64,750 | ||||||||
| 3 | $ 64,750 | ||||||||
| 4 | $ 64,750 | ||||||||
| 5 | $ 64,750 | ||||||||
| 6 | $ 64,750 | ||||||||
| Finance rate | 12% | ||||||||
| reinvestment rate | 12% | ||||||||
| MIRR | = | =mirr(Cash flows, finance rate, reinvestment rate) | |||||||
| = | =mirr(D2:D8,D10,D11) | ||||||||
| = | 15.1% | ||||||||
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