Question
In: Finance
Star Industries owns and operates landfills for several municipalities throughout the Midwestern part of the U.S....
Star Industries owns and operates landfills for several municipalities throughout the Midwestern part of the U.S. Star typically contracts with the municipality to provide landfill services for a period of 20 years. The firm then constructs a lined landfill (required by federal law) that has the capacity for five years. The $9.4 million expenditure required to construct the new landfill results in negative cash flows at the end of years 5, 10, and 15. This change in sign on the stream of cash flows over the 20-year contract period introduces the potential for multiple IRRs, so Star's management has decided to use the MIRR to evaluate new landfill investment contracts. The annual cash inflows to Star begin in year 1 and extend through year 20 are estimated to equal $3.1 million (this does not reflect the cost of constructing the landfills every five years). Star uses a 9.4 % discount rate to evaluate its new projects, so it plans to discount all the construction costs every five years back to year 0 using this rate before calculating the MIRR.
a. What are the project's NPV, IRR, and MIRR?
b. Is this a good investment opportunity for Star Industries? Why or why not?
Solutions
jeff jeffy answered 1 year agoRelated Solutions
(MIRR) Star Industries owns and operates landfills for several municipalities throughout the Midwestern part of the...
(MIRR) Star Industries owns and operates
landfills for several municipalities throughout the Midwestern part
of the U.S. Star typically contracts with the municipality to
provide land services for a period of 20 years. The firm then
constructs a lined landfill (required by federal law) that has
capacity for five years. The $9.8 million expenditure required to
construct the new landfill results in negative cash flows at the
end of years 5, 10, and 15. This change in sign on the...
(MIRR) Star Industries owns and operates landfills for several municipalities throughout the Midwestern part of the...
(MIRR) Star Industries owns and operates landfills for several
municipalities throughout the Midwestern part of the U.S. Star
typically contracts with the municipality to provide landfill
services for a period of 20 years. The firm then constructs a lined
landfill (required by federal law) that has capacity for five
years. The $9.6 million expenditure required to construct the new
landfill results in negative cash flows at the end of years 5, 10,
and 15. This change in sign on the...
Electroboy Enterprises, Inc. operates several stores throughout northern Belgium and the southern part of the Netherlands....
Electroboy Enterprises, Inc. operates several stores throughout
northern Belgium and the southern part of the Netherlands. As part
of an operational and financial reporting review in a response to a
downturn in it markets, the company’s management has decided to
perform an impairment test on five stores (combined). The five
stores’ sales have declined due to aging facilities and competition
from a rival that opened new stores in the same markets. Management
has developed the following information concerning the five...
Sunland Enterprises, Inc. operates several stores throughout the western United States. As part of an operational...
Sunland Enterprises, Inc. operates several stores throughout the
western United States. As part of an operational and financial
reporting review in a response to a downturn in its markets, the
company’s management has decided to perform an impairment test on
five stores (combined). The five stores’ sales have declined due to
aging facilities and competition from a rival that opened new
stores in the same markets. Management has developed the following
information concerning the five stores as of the end...
Personal Trainer, Inc. owns and operates fitness centers in a dozen Midwestern cities. The centers have...
Personal Trainer, Inc. owns and operates fitness centers in a
dozen Midwestern cities. The centers have done well, and the
company is planning an international expansion by opening a new
“supercenter” in the Toronto area.
Background
Cassia Umi, president, heads Personal Trainer’s management team.
Three managers report to her at the firm’s Chicago headquarters:
Janet McDonald, manager, finance; Tai Tranh, manager, sales and
marketing; and Reed Curry, manager, operations. The managers who
run the 12 existing centers all report to...
Personal Trainer, Inc. owns and operates fitness centers in a dozen Midwestern cities. The centers have...
Personal Trainer, Inc. owns and operates fitness centers in a
dozen Midwestern cities. The centers have done well, and the
company is planning an international expansion by opening a new
“supercenter” in the Toronto area. Personal Trainer’s president,
Cassia Umi, hired an IT consultant, Susan Park, to help develop an
information system for the new facility. During the project, Susan
will work closely with Gray Lewis, who will manage the new
operation.
Background
You are enjoying your job as a...
41. An investor who holds a portfolio a. Owns investments in several industries. b. Owns more...
41. An investor who holds a portfolio a. Owns investments in
several industries. b. Owns more than one investment. c. Owns both
bonds and stocks. d. Has invested an equal amount in several
securities.
42. The rate of return from a portfolio is: a. Always greater
than the return from any security within the portfolio. b. Equal to
the rate of return from the best performing security in the
portfolio. c. The weighted average of the rates of return of...
Eskom is a power company conglomerate in the South Africa and operates several power plants throughout...
Eskom is a power company conglomerate in the South Africa and
operates several power plants throughout the region, a few of them
nuclear power plants. Needless to say, the public is concerned with
emissions in the air surrounding these plants. Examine what public
opinion means and critically discuss the questions the public
relations specialists at Eskom must understand about public opinion
before deciding on an appropriate campaign.
Mexicali On the Go Inc. owns and operates food trucks (mobile kitchens) throughout the west coast....
Mexicali On the Go Inc. owns and operates food trucks (mobile
kitchens) throughout the west coast. The company’s employees have
varying wage levels depending on their experience and length of
time with the company. Employees work 8-hour shifts and are
assigned to a truck each day based on labor needs to support the
daily menu. One of its trucks, Donna’s Mobile Fiesta offers a
single menu item that changes daily. On May 6, the truck prepared
150 of its most...
4. Todor owns a U.S. corporation that operates a subsidiary corporation in Bulgaria. Because of the...
4. Todor owns a U.S. corporation that operates a subsidiary
corporation in Bulgaria. Because of the world wide tax approach
adopted in the United States, all income of the Bulgarian
subsidiary is potentially taxed twice, once in Bulgaria and again
in the United States. Name and provide a brief description of the
adjustments available on the U.S. return of the parent corporation
which mitigate the impact of this potential double tax on all
Bulgarian income?
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- You have invested 30 percent of your portfolio in Jacob, Inc., 40 percent is Bella Co.,...
- Parallel Arrays This question is in MindTap Cengage Summary In this lab, you use what you...
- 5. You have invested 30 percent of your portfolio in Jacob, Inc., 40 percent is Bella...
- JAVA Write a test program that prompts the user to enter a series of integers and...
- (2) Cite an example on how organizations like Google, Facebook, Youtube etc collect data for image...
- The legal landscape is perpetually changing. Psychologists must remain abreast of these changes to avoid potentially...
- We are evaluating a project that costs $1.68 million, has a six-year life, and has no...
ADVERTISEMENT