Question

Doak Corp. is evaluating a project with the following cash flows. The company uses a discount rate of 12 percent and a reinvestment rate of 9 percent on all of its projects. >WN- Cash Flow $16,600 7.700 8,900 8,500 7.300 4.700 Calculate the MIRR of the project using all three methods with these interest rates. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Discounting approach Reinvestment approach Combination approach

Answer 1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

projects (Autosaved) (Autosaved) (Autosaved) - Microsoft Excel (Product Activation Failed) Data Review View Add-Ins File Home Insert Page Layout Formulas - 2x % Cut Calibri 11 A = = V General A A = E E Copy Paste Format Painter Clipboard Wrap Text Merge Merge & Center Center B I U SF $ - % % 4:0 .00 8. Insert Delete Format Conditional Format Formatting as Table Styles Cell Styles Σ AutoSum : A Fill Sort & 2 Clear Filter Editing Find & Select Alignment Number Cells - SV570 SH D Font for SJ SK SL SM SN SO SP SQ SR SS S T SU SV 5 570 571 572 (a) MIRR USING DISCOUNTING APPROACH HERE WE HAVE TO CALCULATE PV OF ALL CASHOUTFLOWS AT T=0 CASH OUTFLOW AT T=0= -16600 + (-4700)/(1.12)^5 = -19266.906 CASH OUTFLOW AT T=0 -19266.91 573 574 575 576 577 578 579 580 581 YEAR 0 1 2 CFAT -19266.91 7700 8900 8500 7300 582 583 584 585 586 587 588 MIRR = IRR = 24.80% [=IRR(SM579:SM584)] H invest, EAA MI-np-ir REPLACEMENT S HPR GMAM EAC MACRS NPV RELEVANT BETA LEVERED REPLACEMENT I RRnpvbeta RATION PBP ARR ferences: NL296 Rea BOND OPTION TO WAITSTEIN II BOU 130% 0 9 * * ENG 21-11-2019 ODOB

projects (Autosaved) (Autosaved) (Autosaved) - Microsoft Excel (Product Activation Failed) Data Review View Add-Ins File Home Insert Page Layout Formulas - 2x % Cut Calibri 11 A = = V General A A = E Wrap Text Merge Merge & Center Center B I SF $ - % % 4:0 .00 8. Insert Delete Format Conditional Format Formatting as Table Styles Cell Styles Σ AutoSum : A Fill Sort & 2 Clear Filter Editing Find & Select Alignment Number Cells E Copy Paste Format Painter Clipboard SV606 - SH 589 U D Font for SJ SK S V (b) 590 591 592 593 SL SM SN SO SP SQ SR SS ST SU MIRR USING REINVESTMENT APPROACH WE HAVE TO CALCULATE FUTURE VALUE OF ALL CASH FLOWS THAT IS = 7700 (1.09)^4 + 8900(1.09)^3 + 8500(1.09)^2 + 7300(1.09)^1 + (-4700) = FV OF ALL CASH FLOWS = = 7700 (1.09)^4 + 8900(1.09)^3 + 8500(1.09)^2 + 7300(1.09)^1 + (-4700) FV OF ALL CASH FLOWS = 35750.79 CASH OUTFLOW = 16600 594 MIRR = 16.58% [=RATE(5,,-S0594, 90593)] (c) 595 596 597 598 599 600 601 602 603 604 605 606 607 MIRR USING COMBINATION APPROACH YEAR CFAT 0 -16600 7700 8900 8500 7300 -4700 MIRR 15.99% [=MIRR(SM600:SM605,12%,9%)] Omn invest, EAA MI-np-ir REPLACEMENT S HPR GMAM EAC MACRS NPV RELEVANT BETA LEVERED REPLACEMENT I RRnpvbeta RATION PBP ARR ferences: NL296 Rea BOND OPTION TO WAITSTEIN II BOJ 130% - 0 _+ 9 . * ENG 21-11-2019 . B