Ford Motor Company has a 1.40 beta. If the overall stock market increases by 8 percent, how much will Ford change?
1 answer:
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Answer:
MIRR = 16.6%
Explanation:
We have the formula to calculate the MIRR of the project:
+)
In which:
- FV - terminal value, the future value of net cash inflow which is assumed to be re-invested at the rate of cost of capital = WACC = 12.25%
- PV - the present value of the net cash outflows during the investment at the rate of cost of capital = WACC
- n: numbers of years (n=4)
The future value of net cash inflow Year i = Cash inflow × (1 + Cost of capital)^(number of years reinvested)
= Cash inflow × 1.1225^(n - i)
+) = $424.327
+) = $403.202
+) = $381.65
+) = $360
<em>=> Terminal Value = 424.327 + 403.202 + 381.65 + 360 = $1569.179</em>
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Present Value Year i =
The project requires the initial investment = - $850 and there are no cash outflows during 4 years of the project
<em>=> PV of the project = PV Year 0 = </em><em> = 850</em>
=> MIRR = = 0.166 = 16.6%