Question

Grady Enterprises is looking at two project opportunities for a parcel of land the company currently owns. The first project is a​ restaurant, and the second project is a sports facility. The projected cash flow of the restaurant is an initial cost of

​$1,570,000

with cash flows over the next six years of

​$180,000

​(year one),

​$280,000

​(year two),

$260,000

​(years three through​ five), and

1,740,000

​(year six), at which point Grady plans to sell the restaurant. The sports facility has the following cash​ flows: an initial cost of

​$2,440,000

with cash flows over the next four years of

$370,000

​(years one through​ three) and

​2,560,000

​(year four), at which point Grady plans to sell the facility. The appropriate discount rate for the restaurant is

10.5​%

and the appropriate discount rate for the sports facility is

11.5%.

What are the MIRRs for the Grady Enterprises​ projects? What are the MIRRs when you adjust for the unequal​ lives? Do the MIRR adjusted for unequal lives change the decision based on the​ MIRRs? ​Hint: Take all cash flows to the same ending period as the longest project.

If the appropriate reinvestment rate for the restaurant is

10.5%,

what is the MIRR of the restaurant​ project?

nothing​%

​(Round to two decimal​ places.)

Answer 1