All categories

3 years ago

A firm is considering two mutually exclusive projects, X and Y, with the following cash flows:

Business

1 answer:

Murrr4er [49]3 years ago

4 0

Answer: MIRR (project x ) = 3.42% , Project Y = 4.51%

Explanation:

Modified internal Rate of return

Project X

Period (n) = 4

Weighted Average Cost of equity(WACC) = 8.0%

Cash out flow = -$1000

Cash Inflows = $100 year 1 , $280 year 2 , 370 year 3 ,$700 year 4

Present Value Cash Inflows = PVCIF = Cash Inflow/(1+WACC)^n

PVCIF = 100/(1+0.08)^1 + 280/(1+0.08)^2 + 370/(1+0.08)^3 + $700/(1+0.08)^4

PVCIF = 95.592592593 + 240.05486968 + 293.71792918 + 514.5208969

Present Value of Cash inflows (PVCIF) = $1143.8862884

Present Value of Cash out flows(PVCOF) = -$1000

Modified Internal Rate of Return (MIRR) = $\sqrt[n]{\frac{PVCIF}{PVCOF} } -1$

Modified Internal Rate of Return (MIRR) = $\sqrt[4]{\frac{1143.8862884}{10000} } -1$

Modified Internal Rate of Return (MIRR) = 0.034178971

Modified Internal Rate of Return (MIRR) = 3.41789971 = 3.42%

Project Y

Period (n) = 4

Weighted Average Cost of equity(WACC) = 8.0%

Cash out flow = -$1000

Cash Inflows = $1100 year 1 , $110 year 2 , $50 year 3 ,$55 year 4

Present Value Cash Inflows = PVCIF = Cash Inflow/(1+WACC)^n

PVCIF = $1100/(1+0.08)^1 + $110/(1+0.08)^2 + $50/(1+0.08)^3 + $55/(1+0.08)^4

PVCIF = 1018.5185185 + 94.307270233 + 39.691612051 + 40.42641904

Present Value of Cash inflows (PVCIF) = $10192.9438198

Present Value of Cash out flows(PVCOF) = -$1000

Modified Internal Rate of Return (MIRR) = $\sqrt[n]{\frac{PVCIF}{PVCOF} } -1$

Modified Internal Rate of Return (MIRR) = $\sqrt[4]{\frac{1192.9438198}{10000} } -1$

Modified Internal Rate of Return (MIRR) = 0.0450931421

Modified Internal Rate of Return (MIRR) = = 4.50931421 = 4.51%

You might be interested in

Consider an apple orchard owner deciding how to incentivize his fruit pickers to get them to pick more apples he should: a. To

Mnenie [13.5K]

Answer:

c. To pay the pickers per pound of apples picked

Explanation:

In an hourly rate, employees will be paid based on the time that they spend on the job. The productivity of the employees will not be a factor in their payment. As long as they spend equal amount of time in the workplace, they will be paid the same. This will provide the employees with no incentive to be more productive.

An incentive will be created if the employees are paid according to their workload. Meaning that the more productive they are, the higher the payment that they will receive. In this particular case This will make the employees will become motivated to pick as much apple as possible.

3 0

3 years ago

Use the following information to prepare a classified balance sheet for Alpha Co. at the end of 2016. Accounts receivable $41,08

Akimi4 [234]

Answer:

Explanation:

In the classified balance sheet, we summarize the asset and liabilities into various types

Like assets are divided into fixed assets, current assets, and intangible assets.

Likewise, liabilities are also divided into current liabilities, long term liabilities

In every balance sheet, the accounting equation has used that means

Total assets = Total liabilities + Shareholder equity

The preparation of the classified balance sheet for Alpha Co. is presented in the spreadsheet. Kindly find the attachment below:

5 0

3 years ago

A lockbox plan is most beneficial to firms that Select one: a. have widely dispersed manufacturing facilities. b. have a large m

Anestetic [448]

Answer: d. have customers who operate in many different parts of the country

Explanation: When checks are to be collected from customers of a business that are spread over a wide geographical area, a lockbox plan is employed in order to speed up the collection of checks. It involves the customers dropping their checks in the lock boxes rather than mailing it to the business thus, the use of lockboxes help reduce mail float.

8 0

3 years ago

During a contractionary phase of the business cycle, which of the following most likely occurs?

Zielflug [23.3K]

more tax revenues are remitted

6 0

3 years ago

Read 2 more answers

The internal financial statements of Vera Incorporated show that their beaded purses incurred an operating loss in the most rece

brilliants [131]

Answer:

Vera Incorporated

Change in annual operating income from discontinued business:

Annual Operating Income would reduce by $78,000.

Explanation:

a) Calculation of the Net Income Lost:

Loss of Contribution ($99,000)

Avoidable fixed cost $21,000

Reduction of Income ($78,000)

b) The line of purses contributes $80,000 towards the company's fixed cost. Therefore, discontinuing this line of business would lead to the loss of this steam of income. The amount of reduced operating income will be $78,000 ($80,000 - 2,000).

4 0

3 years ago