Compute the MIRR statistic for Project J if the appropriate cost of capital is 9 percent....
Compute the MIRR statistic for Project J if the appropriate cost
of capital is 9 percent. (Do not round intermediate
calculations and round your final answer to 2 decimal
places.)
| Project J | ||||||
| Time: | 0 | 1 | 2 | 3 | 4 | 5 |
| Cash flow: | −$1,100 | $380 | $1,530 | −$530 | $330 | −$110 |
Should the project be accepted or rejected?
-
accepted
-
rejected
Homework Answers
| (All amounts in $) | ||||
| Given, | ||||
| Cost of capital | 9% | |||
| Year | Cash flow | PVF @ 9% [1/(1+r)^n] | Discounted Cashflow | |
| 0 | (1,100) | 1.00000000 | (1,100.000000) | |
| 1 | 380 | 0.91743119 | 348.623853 | |
| 2 | 1,530 | 0.84167999 | 1,287.770390 | |
| 3 | (530) | 0.77218348 | (409.257244) | |
| 4 | 330 | 0.70842521 | 233.780320 | |
| 5 | (110) | 0.64993139 | (71.492452) | |
| Net Present Value | 289.424866 | |||
| Net Present Value (Rounded off) | 289.42 | |||
|
Since, NPV of the project is positive, project should be accepted |
||||
Since, Reinvestment rate is not provided, it's assumed as 9% , same
as cost of capital. ![Present value (negative cash flows, finance rate) =-1100 [530/(1+0.09)^3] - [110/(1+0.09)^5] = 1,580.75 = 380 (1.09)^4 + 1530](http://img.homeworklib.com/questions/a4321e70-712a-11ea-9a0c-458bf639ba6e.png?x-oss-process=image/resize,w_560)
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