Question

10 ildpter Problems - The Basics of Capital Budgeting Search this course < Back to Assignment Attempts: Keep the Highest: /1 9. Problem 11.13 Click here to read the eBook: Modified Internal Rate of Return (MIRR) Problem Walk-Through MIRR A firm is considering two mutually exclusive projects, X and Y With the following cash flows: Project X -$1,000 $110 $280 $400 $650 Project Y $1,000 $1,000 $110 $45 $45 The projects are equally risky, and their WACC is 13%. What is the MIRR of the project that maximizes shareholder value? Round your answer to two decimal places. Do not round your intermediate calculations. pon Rate ERUD Grade It Now Continue without Coupon 2

Answer 1

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- 2x Σ AutoSum : A projects (Autosaved) (Autosaved) (Autosaved) - Microsoft Excel (Product Activation Failed) File Home Insert Page Layout Formulas Data Review View Add-Ins % Cut Calibri 11 A A = = = V Wrap Text General E Copy Paste BI U D- DA SF Merge Merge & Center - Center $ Format Painter % % , 4:0 .00 :.: Conditional Format Cell Insert Delete Format Formatting as Table Styles Clipboard Font Alignment Number Styles Cells XN209 Fax Formula Bar XL XM Fill 2 Clear Sort & Filter Editing Find & Select - Xo Xp XQ XR 190 YEAR 191 192 193 -1000 110 -1000 1000 110 45 2 280 400 650 45 194 195 196 197 198 199 200 201 RATE 13% 13% NPV $ -7.50 $29.89 (=NPV(XP198,XP193:XP196) +XP192] [=NPV(XO198,X0193:X0196) +XO192] 202 MIRR 203 204 12.79% 13.84% (=MIRR(XP192:XP196,XP198,XP198)] (=MIRR(XO192:X0196,X0198,X0198)] 205 206 ANSWER: MIRR : PROJECT Y = 13.84% PRJECT Y HAS HIGHER NPV WHICH INDICATES THAT IT MAXIMIZES THE SHAREHOLDER VALUE 207 208 209 210 NON Rea invest, EAA MI-np-ir REPLACEMENT S HPR GMAM EAC MACRS NPV RELEVANT BETA LEVERED REPLACEMENT BOND IRRnpvbeta RATION PBP ARR erences: SM219 OPTION TO WAIT BO! 120% STI 1 + OPER 9 * ENG 03-11-2019